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Ask HN: What % of equity should a CTO get?
Hi all, I'm a HN regular posting anonymously because this contains sensitive information.
Short version: I've been managing everything technical for my friend's startup, and was asked to join as a CTO, in exchange for equity. What % should I ask for?
Long version: this startup is run by my very good friend. He is an amateur coder, and developed the code base himself part time over a few years. When he was ready to invest $ to make the site grow, he brought me on board on a consulting basis. I found, hired & currently manage a small team to work on the site, and he pays for the budget. Before I came on board, the code base was pretty terrible: all the development was being done in real-time on production server, never any testing, full of bugs, etc. When I came in, I did stuff like introduce version control, create a staging server, code/schema refactoring, automated testing suite, automated builds, bug/issue tracking, etc. I also manage the team itself, and we regularly have informal meetings where we talk about high-level stuff for the site's direction - you get the idea.
Right now, I put in about 10-15 hours of work a week, out of which I bill for about 5, using a heavily discounted rate (about 1/3 of what I bill others), because it's my very good friend. Before I came on board, the site was developing slowly, but since then it's been growing at a very good organic pace. It is making some money already - not much, about $200 per month, and it has about 1000 daily users. It's not profitable by a long shot (obviously a dev team of 4-5 people costs a lot more), but I believe it has the potential to be in the future.
I want to offer that I don't take any $ myself, contribute about 15 hours a week and take a %. My friend (who is the only owner with 100% equity, btw) have a great relationship, and he actually brought up bringing me in as a CTO himself, but all talks about money are uncomfortable (for me), especially with friends, so I wanted to ask here - in this situation, what's a fair % to ask? Some examples with references would be ideal. Or some kind of a formula that makes sense to calculate it.
Any help would be greatly appreciated. Thanks!!!
- Roridge 17y agoHonestly, ask him to make you an offer. If he says 15% and you think "yes, that feels right" then go for it. If not at least you will know what ball park he is thinking of. If I was your CEO I would probably calculate it like this... If you are doing 15 hours of a 40 hour a week job, that would be about 6%. If you were to consider a CEO is the "top" position at 10 and a CTO is next a 7 then (as a friendly gesture based on work so far) I would weigh that 6% by the difference and come in at about 18% relative to the importance of what you are doing against how much time you do it for. But that is just me.
- staunch 17y agoRisk = reward. You're not taking much. A CTO that works part-time at only 15 hours a week? That's hardly a commitment worthy of a significant percentage. Be prepared for the possibility that his offer will be 0%.
- aditya 17y agoWhat's the upside of equity? Is he going to raise cash? ie. Are you going to be diluted? Read the equity equation by pg and the founder's pie (google it). You need to ask yourself not only how much you think is fair based on work you've done (and compensation received) but also what will keep you motivated till an exit, and how much dilution you can live with.