Finding cofounders · Equity

What percentage of the company should a marketing cofounder be entitled to?

Boris Tkachev Empowering Business - Customer Communication Via SMS

May 5th, 2015

Currently i am shopping for marketing cofounder and I was approached by a marketing person who offered to handle all of the marketing and bus development for an exchange of 50% of the company.

I was thinking to agree, but now i am thinking to offer a trial period where he should bring some sales before hand and only then possible offer 50%. Or What are other safe ways to handle marketing efforts with cofounder?

Peter Mansfield Accomplished marketing pro focused on user acquisition, partner development and branding in venture/tech

May 5th, 2015

That's way over the top. I'm a startup marketing specialist. I get in very early, and work for equity/cash. Single figures is more realistic!

Trevor Power Business Development Manager at Warwick Ventures Ltd.

May 5th, 2015

Definitely read Slicing Pie as recommended by others above before you agree to a deal.

Mitchell Portnoy Healthcare Information Executive

May 5th, 2015

That's a LOT of equity to demand.  If this person is going to be CEO and President and is committed to your project as you are - then perhaps this might be (more or less reasonable).  But what of other founders - key employees to come?  Shouldn't you reserve equity for them as well?

Tim Kilroy Analytics - LTV - Boosting Profits - Digital Marketing

May 5th, 2015

VESTING. If you think that he is worth 50% of your company, then go for it - except that the 50% vests over 4 years and nothing vests until he has been there a year (so on day #366, 25% of his options "vest" - that is. he can purchase them at their value when he started) but that gives you 1 year to figure out if he is worth the equity share...

Andrew Grubb Head of Innovation at Mercer

May 5th, 2015

Simple: slicing pie by Michael Moyer.  Although dynamic equity may not be for everyone, its concepts are founded on fair and equitable treatment based on the value that individuals bring to an organization (startup).

If somebody 'demanded' 50% equity to join my business, I would struggle to not find that offensive.  Keep shopping Boris, you'll find quality people easily.

Anonymous

May 5th, 2015

Hi Boris - that's an enormous amount. So many factors about your business will determine my response, but unless you really want this person to be everything, don't expect to take on many other people, then MAYBE 20. But start thinking below 10%. Of course, that's an answer outside of knowing anything about your business.

Remember, most CMOs last 2 years.
Also remember about dilution. You keep 50% now, you do a couple of rounds, you miss a number, you do a round, you aren't left with much at all.

Leo PhD Product development executive, serial entrepreneur and Angel Investor

May 5th, 2015

I agree with all the responses that suggests the Slicing Pie model. The determination of equity should not be random and this person was giving you a random number. Equity should be earned, one way or the other. A vesting process sounds reasonable.

On a more personal level, you should also be wary of someone coming through this forcefully with an ask this high without any justification. You should ask yourself if you would like to be in business with someone like this and whether there would be a personality mismatch. If you have known this person for a long time and you can trust him/her, that's a different story. But based on what you wrote, it sounds like you may not know this person well.

Think longer-term, and ask yourself if you trust this person. This could float or sink your startup. I have seen far too many mistakes made at this stage. Hope this helps.

Amy Weicker Director of Marketing, Marketing Consultant, Social Media Strategist, Customer Experience Enthusiast

May 5th, 2015

If you're far enough along that you NEED a marketing co-founder, then you've probably already done enough work that you shouldn't be considering that large an equity split.

In a brand new venture (idea stage, maybe a very rough prototype) where you're both forgoing salaries and starting up unfunded -- with equal workloads, time investment, and financial contributions AND combined, have all the skills necessary to get the business off the ground -- 50% could be a reasonable ask. However, I have a hard time imagining any other scenario where a 50% ask from a marketer would be anything but offensive.

Having said that, even in the case of a brand new venture, you should still retain majority and insist on a vesting period or trial to make sure you're compatible as partners. I'd earmark a percentage for funding and employee growth as well, prior to drawing up your co-founder's equity agreement.



For reference purposes: I am the marketing co-founder of an unfunded 2-person startup, where we have a 50/50 split and have agreed to contribute equally when equity needs to be divvied up in the future. I did not, however, start with a 50% share; I joined pre-launch, with a 30% royalty agreement and no salary. It wasn't until I had successfully launched the business, grown the customer base, proven market fit, and proven myself an essential team member that I was offered the equity. Our personal financial and time contributions have been equal, and I probably wear about 5x as many hats. Given the amount of work I've put in at this point and considering where the company would be without my efforts, I think our split is very fair... but I would never have considered asking for 50% when we began working together.

David Fridley Founder at Synaccord

May 5th, 2015

Pay for performance, pay for milestones, vest it, but don't just sign it over.  I am considering  a grunt fund. See slicingpie.com. I would love to hear from anyone who has done it.

F. Fortune Managing Director at Pristino Foods

May 5th, 2015

Boris; Marketing is NOT sales. Marketing (hopefully) begets sales. The smart way to to counter his offer is to give him/her a wholesale cost on your product or service with support materials et. al. and let the marketer keep 100% of his selling price. Let him create a separate company (LLC) for his marketing and sales efforts and you keep 100% of your company. His success is them based on his performance without involving an unproven entity inside your company. This is an arrangement that I have not only used in the past (because the concern cuts both ways) but am currently finalizing as we speak. You have to ask yourself why a "marketer" would want a percentage of your company when he can have 100% of his own. You will need a binding agreement, in any case, that is both a nondisclosure and a non-compete to allow you to seek remedy if he goes sideways on you.