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Thanks for the advice brudgers, I agree with everything you said. The tricky thing regarding the last point is that this is not a co-founder and I haven't hear

Thanks for the advice brudgers, I agree with everything you said. The tricky thing regarding the last point is that this is not a co-founder and I haven't heard the topic of equity shares among non-co-founders or even non-employees discussed much before. But you are right to just do what is right by people, and the rest will work itself out.

brudgers 10y ago
If someone owns part of the company, then they are a business partner. Depending on the jurisdictions in which the company is incorporated and runs and probably some other things, a person with stock may have rights that give them leverage if things go south. Which is my main point: you are in business with anyone who has stock in the company. The reason I pointed to the founder's article is largely because it emphasizes that equity may be used to reward long term contribution versus relative contribution at the time the company is formed. In the context of doing what is right, it is still probably the case that 60% of the current value probably is not worth 60% of the long term value. Particularly for someone who will not be contributing long term. Generally, the rule is to pay people in cash rather than equity if they are non-employees or not cash investors. Partially because of legal complications that come with barter, partially because amateur investors, like amateur anything, can create problems. In the Silicon Valley investor model (as opposed to the local yokel), advisor shares are increasingly less common. The advisors come with cash and are angel investors. The reason that it is tricky and there isn't much about advisor shares is because it is not really a part of the Silicon Valley investor model. That's probably worth consideration if the business is intended to be a startup in the Silicon Valley sense rather than the buzzword for any new business including Mexican bistros, one truck lawn care services, and blogs with adword ads and Amazon affiliate links. My bottom line advice is don't do anything tricky with equity because it will be hard to get right.

brudgers 10y ago

If someone owns part of the company, then they are a business partner. Depending on the jurisdictions in which the company is incorporated and runs and probably some other things, a person with stock may have rights that give them leverage if things go south. Which is my main point: you are in business with anyone who has stock in the company. The reason I pointed to the founder's article is largely because it emphasizes that equity may be used to reward long term contribution versus relative contribution at the time the company is formed. In the context of doing what is right, it is still probably the case that 60% of the current value probably is not worth 60% of the long term value. Particularly for someone who will not be contributing long term. Generally, the rule is to pay people in cash rather than equity if they are non-employees or not cash investors. Partially because of legal complications that come with barter, partially because amateur investors, like amateur anything, can create problems. In the Silicon Valley investor model (as opposed to the local yokel), advisor shares are increasingly less common. The advisors come with cash and are angel investors. The reason that it is tricky and there isn't much about advisor shares is because it is not really a part of the Silicon Valley investor model. That's probably worth consideration if the business is intended to be a startup in the Silicon Valley sense rather than the buzzword for any new business including Mexican bistros, one truck lawn care services, and blogs with adword ads and Amazon affiliate links. My bottom line advice is don't do anything tricky with equity because it will be hard to get right.