3 ms·

Ask HN: New startup, how much equity for the idea

How much equity should the originator of the idea be offered, assuming they do nothing else except conceive of the idea? Also assuming there is one other technical co-founder who does all of the development, devops, marketing, sourcing out other tasks, etc.

malux85 8y ago
What’s your idea? Tell us and we’ll tell you. That was a joke by the way, but a half hearted truth into saying ideas are worthless, it’s execution that’s important. Also - typically you see a technical and non-technical founders the non-technical will take on anything they are capable of doing - e.g. marketing, or at least managing the marketing (doing it too initially) If you’re just giving an idea and are then hands off, I’d maybe give you 5% equity. Maybe.
- halfmatthalfcat 8y ago
  Yeah, the non-technical founder essentially handed the idea off to the technical founder and was like "hey, here's an idea, if it makes money, throw me some equity". They don't want to participate or be involved in any meaningful capacity and I expect that they simply would like to make some money if the idea does end up going somewhere simply for having the idea.
dominotw 8y ago
zero
natalyarostova 8y ago
There is a huge gulf between "Facebook clone, but for Babies." And "my idea is based off of research I did in my graduate program plus a lightweight non-prod quality library I wrote in Python"
- btian 8y ago
  But prototype is more than an idea though
ada1981 8y ago
There is a cultural fiction in SV that gets repeated that “ideas are worthless”. Folks also love to say “execution is everything.” Keep in mind, this idea tends to favor capital and insitutionalized power. Executing a bad idea isn’t valuable and can cost you lots of money, time and opportunity. Since most companies fail to make a profit, I suppose we could argue that most execution is worthless too. So ideas can be seen as an exponent of sorts. An idea with a greater than 0 value will be useful for a team that can execute. Execution being equal, ideas are everything. But not only that, the people and contexts that create great ideas are even more valueable. Creativity is a resource that is always needed. Uncreative people don’t like this at all, so they often try to devalue the power of ideas. Of course they are also the ones who will try to execute on them. Smart people understand the value of both. They also understand their own worth. They don’t need to devalue or belittle others in order to create partnerships. There are plenty of brilliant idea generators who are paid handsomely simply for generating ideas and licensing them to existing companies.
claudiulodro 8y ago
If an idea is literally all they bring to the table and it doesn't have a patent or anything around it, I would give them something like an advisory role and 2% equity. If they don't like this, just take the idea and start the company without them if it's a good idea. A person with an idea that cannot execute on it has no leverage. I don't know why you would be generous with this person. They will have no risk and no skin in the game, so why give them a big reward?
- halfmatthalfcat 8y ago
  Yeah, I want them compensated in some way but I feel like anything more then 10% is way too much. They're of the type that they simply want to sit back and "get rich" but aren't technically-minded and I get the sense that they don't really want to be involved. It wasn't so much "let's start a company" but more, hey here's an idea, if it takes off, throw me some equity.
danieka 8y ago
I think it makes sense for everyone who’s active in starting a company to get an equal split of the equity. Starting a company is as much about the work you’re going to put in as it is about what you’re bringing to the table. It also makes sense to eliminate any areas for friction, you’ll probably have plenty of friction as it is. If the idea person isn’t going to be a part of the team I would actually be hesitant to give them any/much equity. But that the depends on the idea. Trivial ideas are a dime a dozen, but some ideas require deep knowledge about specific fields of industry, in such a case the idea is worth more. Also, what is your relationship with the idea originator? Friendships are worth more than equity. Anyway, I would probably give no more than 10% for just the idea. If the idea person wants more I would try to get them involved in the company or simply not start the company. There are a ton of great ideas to be had. By the way, every time I tell someone I’m an app developer they say they have a great idea for an app. I rode with one cab driver the other day who said he had an idea for an app and “it’s like Uber but with one difference, but if I tell you you’ll steal it and become a billionaire”. Sure pal, good luck with that. Edit: spelling

malux85 8y ago

What’s your idea? Tell us and we’ll tell you. That was a joke by the way, but a half hearted truth into saying ideas are worthless, it’s execution that’s important. Also - typically you see a technical and non-technical founders the non-technical will take on anything they are capable of doing - e.g. marketing, or at least managing the marketing (doing it too initially) If you’re just giving an idea and are then hands off, I’d maybe give you 5% equity. Maybe.

halfmatthalfcat 8y ago
Yeah, the non-technical founder essentially handed the idea off to the technical founder and was like "hey, here's an idea, if it makes money, throw me some equity". They don't want to participate or be involved in any meaningful capacity and I expect that they simply would like to make some money if the idea does end up going somewhere simply for having the idea.

dominotw 8y ago

zero

natalyarostova 8y ago

There is a huge gulf between "Facebook clone, but for Babies." And "my idea is based off of research I did in my graduate program plus a lightweight non-prod quality library I wrote in Python"

btian 8y ago
But prototype is more than an idea though

ada1981 8y ago

There is a cultural fiction in SV that gets repeated that “ideas are worthless”. Folks also love to say “execution is everything.” Keep in mind, this idea tends to favor capital and insitutionalized power. Executing a bad idea isn’t valuable and can cost you lots of money, time and opportunity. Since most companies fail to make a profit, I suppose we could argue that most execution is worthless too. So ideas can be seen as an exponent of sorts. An idea with a greater than 0 value will be useful for a team that can execute. Execution being equal, ideas are everything. But not only that, the people and contexts that create great ideas are even more valueable. Creativity is a resource that is always needed. Uncreative people don’t like this at all, so they often try to devalue the power of ideas. Of course they are also the ones who will try to execute on them. Smart people understand the value of both. They also understand their own worth. They don’t need to devalue or belittle others in order to create partnerships. There are plenty of brilliant idea generators who are paid handsomely simply for generating ideas and licensing them to existing companies.

claudiulodro 8y ago

If an idea is literally all they bring to the table and it doesn't have a patent or anything around it, I would give them something like an advisory role and 2% equity. If they don't like this, just take the idea and start the company without them if it's a good idea. A person with an idea that cannot execute on it has no leverage. I don't know why you would be generous with this person. They will have no risk and no skin in the game, so why give them a big reward?

halfmatthalfcat 8y ago
Yeah, I want them compensated in some way but I feel like anything more then 10% is way too much. They're of the type that they simply want to sit back and "get rich" but aren't technically-minded and I get the sense that they don't really want to be involved. It wasn't so much "let's start a company" but more, hey here's an idea, if it takes off, throw me some equity.

danieka 8y ago

I think it makes sense for everyone who’s active in starting a company to get an equal split of the equity. Starting a company is as much about the work you’re going to put in as it is about what you’re bringing to the table. It also makes sense to eliminate any areas for friction, you’ll probably have plenty of friction as it is. If the idea person isn’t going to be a part of the team I would actually be hesitant to give them any/much equity. But that the depends on the idea. Trivial ideas are a dime a dozen, but some ideas require deep knowledge about specific fields of industry, in such a case the idea is worth more. Also, what is your relationship with the idea originator? Friendships are worth more than equity. Anyway, I would probably give no more than 10% for just the idea. If the idea person wants more I would try to get them involved in the company or simply not start the company. There are a ton of great ideas to be had. By the way, every time I tell someone I’m an app developer they say they have a great idea for an app. I rode with one cab driver the other day who said he had an idea for an app and “it’s like Uber but with one difference, but if I tell you you’ll steal it and become a billionaire”. Sure pal, good luck with that. Edit: spelling