Currently, we are a team of well rounded four engineers (who does everything) and are looking to add a member with software architecture experience as CTO on our team. I am also willing to pay near to market rate salary along with substantial equity.
One of the technical person who I am considering has an excellent education background, good architecture experience and some good start-up experience. He would be an excellent addition to our team and stabilize our product. How much equity should I offer to give to bring CTO ?
Sincere thanks for sharing your insights,
If he seriously asked for 30% + market salary, that would a red flag for me.
I agree with Jean and Jonathan that in the situation you describe (validated product, paid customers, dev team, seed money...), he really shouldn't ask for more than 5% on a 4-year/1-year cliff vesting schedule, unless he brings some unique experience to the table (as Jean points out).
I found this very interesting blog post by Jason Cohen (aka asmartbear.com), which confirms the 3-5% range in a "common" situation (of course, there's no such thing as a common situation ;-) ): http://blog.asmartbear.com/cash-equity-compensation.html