Equity · Equity distribution

Joining an experienced team of co-founders, while having no experience myself. Is this a good offer?

Anonymous

July 25th, 2020

I was offered a CTO position in a pre-seed startup (not as a co-founder) with 5-10% equity (diluted). The startup aims to solve a huge open problem and I will be responsible for finding the solution and implement it. The two partners have the experience and connections while I have none, nor do I have any managerial experience. Nevertheless, the startup is research oriented and its success will be based on my work. Is this a fair offer?

David M

Last updated on July 26th, 2020

Be very cautious of equity that can be diluted. I have heard founders give a wide assortment of "logic" and reasoning (mostly nonsense that protects THEM..not YOU), but at the end of the day there is only one truth...it sets you up to get screwed. A great scene to bring home the point is in the social network where one of the founders gets diluted into essentially nothing (although in real life it appears he sued and gained back a considerable amount of his stake.) As for your experience, if they are hiring you, you have something they do not have..and that has great value. So don't limit yourself in your mind as not having experience. I would also advise you to rethink your equity %. If they are not paying you, and they have not solved the problem, and furthermore asking you to solve it for the startup, why would you not be an equal co-founder??? There is no doubt that experience in the process is highly valuable. Connections can be valuable but alone are worthless. It all depends on what those connections are bringing to the table. If they have brought nothing as of current, they hold no tangible value to your startup at this time. Sure, if down the line one of those connections funds, or arranges for business that makes your company...then absolutely those are hugely valuable and pivotal to success, and too often those are undervalued by entrepreneurs seeking them. I have a history in the movie industry. At one point I knew the CEO's of Warner Brothers, Universal, LionsGate, Paramount...and half a dozen best picture oscar winning producers. Those are connections many pay for merely the access to. But I can also tell you they mean nothing unless they write a check, or a sign a contract or use political power to get a star bankable actor or prime distribution date..etc. My point...everyone has connections. You say you don't have connections. I guarantee you I could help you go out there and get a connection with the top players in your industry. Navigating those connections...knowing how to press firmly but not offend...how to utilize passion and pressure points.., knowing how to interweave strategy that takes that connection to the point of wanting to entertain doing business with you..THAT is a COMPLETELY different skill set that so many hacks in any industry who boast having "connections" lack. Feel free to reach out if you want a sounding board.

Matt Mansour Technical CoFounder

Last updated on July 29th, 2020

Sweat equity for a tech venture on a tech product that you're building?

I'd ask for equal share of the pie. That's assuming they're pulling their own weight with what they're bringing to the table.

If they're that connected and experienced they'd already be funded and paying you an annual salary + 5%

You can find similar jobs with a salary + 5% on angel.co

Know your worth. Ask for it.

And make sure they can actually market it effectively and get people to pull out their credit cards and pay, after you invest a bunch of time upfront building it for free.

Keep it simple: *I am a maker. You are a seller. I can make it, and if you can sell it then let's split it.*

Grill them on marketing strategy. Find out how they will get the first paid user? The first 10? The first 200? How long is the path to monetization?

Jett T. Angel investor, startup advisor, entrepreneur, ideator, engineer, published author, producer, ...

July 25th, 2020

That really depends on the details, but it doesn't sound like it is.

Are you getting a salary? If not, then the answer is definitely no.

Happy to chat a bit more to help you figure this out.

Peter Ozonyia Founder & CEO at Education Frontliners: International Student Recruitment Agency

July 31st, 2020

It really depends on the amount of work and commitment required of you and whether your professional input shall be a one off thing. But if it is not going to be one off input, then I really don't think it's a fair offer given the fact that 'its success will be based on (your) work'.

Dr. Anand Agrawal Entrepreneur, Mentor, Cofounder, Educator, and President

July 26th, 2020

seems good to me

Steve Owens Startup Expert

July 28th, 2020

Would you take your salary and invest it in this business? Do you consider yourself a sophisticated investor? I doubt any sophisticated investor would be willing to invest this much of their net worth in a pre-seed startup.


Maybe think about deferred compensation (1st lien on all assets) with an a warrant to purchase shares at any price that company sells shares to anyone else for. Either way, big risk of working hard and getting nothing.

Nitin Gudadhe Founder & Director at SoftBlock Solutions Pvt Ltd

July 31st, 2020

This happens, as most of time co-founder are not tech. If that is case then you are good tech guy. You still need find question for this, Is there any regular salary? so you can manage your day in day out. Or only equity share in company. Also when this equity will going to give benefit and what is possibility for possible solution you can bring to market for open problem.