Startups · Entrepreneurship

What amount of equity would you give a CTO at a seed stage?

Mike Manangan --

September 7th, 2016

The question is related to the case of a seed stage startup that already has a working product on the market. This is a tech startup so the technology piece is very important and this person will be critical to the success of the business down the line.

Alejandro Cremades Executive Chairman at CoFoundersLab

September 7th, 2016

Depends on your space and also how far along you are in the life of the company. If you are an engineering driven organization I have seen CTOs receive anywhere between 5 to 10% in stock options with a vesting schedule of 4 years and a 1 year cliff. If you are not then probably between 2% to 5%. It all comes down to how critical this role is for your venture.

cwikla I build. You sell. Boom.

September 7th, 2016

How about (assuming money is leveraged against equity and the ratio is CTO/You)

I have an idea: 50/50
I have an idea and raised angel funding or friends/family: 50/50 (I have a nice personality, but the business doesn't exist)
I have an idea and raised angel and have 2 customers lined up: 50/50 (probably I convinced my buddy to use it)
I have an idea and raised angel, outsourced  and have 15 customers lined up:  20/50 - (SWEET SPOT. A little bit of money and the market is growing, but with your help we can be HUUUUGE...)
I have an MVP and spent 100k of my own money (no customers): 50/50 (trying to find market fit but nothing successful)
I have an MVP and 7 customers using it: 25/75 (possible fit, lots of risk)
I have an MVP and 20 customers using it: 5/95 (seems like I have something! I'm going to raise a round!)
I have a product, raised A and need to scale 2-5/95 ( booyah!  I can hire real people now)


Terrance Boult El Pomar Prof of Innovation and Security at U. Colorado at Colorado Springs

September 7th, 2016

The answer depends very heavily on what is their salary and the expected scale of the role, and if you are talking % with or without dilution protection, the competitive ness of our market (NYC is a hot market for CTOs) and very much depends on your marketsize/projections -- 5% of an app company with $100,000 potential would not be worth a week of effort, 5% of a million dollar company is not much of an incentive, 5% of a 100,000,000 operation is a very good incentive.

You say they product already exists, but nothing about the size of the customer base and stability of the product.  if its an MVP that was slapped together and is getting initial customer feedback, that so is the CTO is going to have rearchitect it for scaling, lead a proper (agile) implementation and also help in fund raising, then expect 100-200K (depending on the complexity of the product and your location and size of the Engineering group) + 5-10% vesting as Mr. Cremades, suggested.  If you are talking equity only and need that level of work it will be much higher percentage. If the product is solid with a large base and little/no need for refinements, and the CTO is mostly for the next product, then percentage would be lower, maybe 2-3%.


You need to look at it compared to what a good CTO can make and design a meaningful total package. Of course, you can always find unqualified people for less and there will likely bebe business folks that will suggest you keep it the CTO's role small. You might find some qualified folks for less, but if the incentive is small they are very likely to leave when things don't go very well. I've mentored a couple of companies that went the low-incentive route and lost or where having struggling to keep their CTOs. The cost of restarting with a new CTO is much much higher.

Mary Furlong CEO at Mary Furlong & Associates, Producer of What's Next Boomer Business Summit, & Silicon Valley Boomer Venture Summit

September 8th, 2016

Agree re stage of company. Mary Furlong, Ed. D. CEO Mary Furlong & Associates Furlong@aol.com Save the date! June 22, 2016 www.boomerventuresummit.com

Viet Ngo Software

September 8th, 2016

If it is at very early stage of the company, means you probably don't have a product or mvp ready, the equity for the CTO could easily be 20-30%. If it is at later stage, when the company at bigger size it could be 5-10%. Anyway, if this is a very good CTO which will make big different in the company product/ business usually you won't question the salary or amount of equity give up to bring him on board. 

Joe Hipsky Co-Founder, CSO at iraLogix

September 8th, 2016

Depends on level of involvement and impact to the overall success and several other variables. While there are ballparks that have been mentioned, I'd have a few more questions before I would feel comfortable making a suggestion 

Rod Abbamonte Co Founder at STARTREK / @startupHunter / @startupWay / @CoFounderFound / @GOcapital / @startupClub / @lastminute

September 8th, 2016

All depends but in essencial you need to prove your capacity to negotiate good terms for you, your company and who will be enjoying.

Alejandro Cremades Executive Chairman at CoFoundersLab

September 7th, 2016

Miguel Hidalgo really appreciate the kind words :)

Michael Lipson Executive Coach & Strategic Consultant

September 7th, 2016

There's a lot of good comment which I agree with.  Also, remember more equity w/less salary ad vice versa.  if there's $0 than you'll need to go above what's been stated to get a "player." You might also consider getting creative and issuing equity awards/incentives for key milestones (on top of the typical 4 yr vest, 1 yr cliff) if the milestones can be explicitly defined and will make sense over the longer term. 

Mary Furlong CEO at Mary Furlong & Associates, Producer of What's Next Boomer Business Summit, & Silicon Valley Boomer Venture Summit

September 7th, 2016

That could work too With a great CTO Mary Furlong, Ed. D. CEO Mary Furlong & Associates Furlong@aol.com Save the date! June 22, 2016 www.boomerventuresummit.com