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How much equity should I get as a first engineer?
I'm in a bit of a weird situation right now so I'd appreciate some advice.
I joined a start-up fresh out of university as the first employee with a non-technical founder, taking (at the time) at least 25% less than my market rate. At the time, I settled for it because it is a project I was really excited about and it was a great portfolio building opportunity for me as a developer, and I was quite empathetic to the financial situation. My contribution to the company can be said to be the backbone of it, but the founder denied me the title of co-founder on the basis that I was drawing salary while he is funding the company out of his pocket. We're at seed funding right now and he's only giving me 1%. But without me, the product wouldn't be half of where it is today.
The general sense I get is that because I am young, my opportunity cost is lower and he's using that as an excuse to give me less equity. My value to the company is plain to see because I've built something that everyone (other developers, investors, potential customers) is amazed by, but I have no numbers to quantify my value to the company because we are not making money yet (due to other factors that I have no control over). I have a colleague in my boss's other company who is in a similar situation: young, low market rate, huge contribution to the company, only given 1%, no cofounder title. It's pretty clear to me that he's lowballing me and I'm pretty set on leaving, but I do want to know how much someone in my situation (young but huge contribution) should get, because I haven't read about it anywhere. Appreciate your input :)
- tlb 7y agoIt irritates me when business guys try to give technical people the shaft like this. If you're building the first version of the product and plan to grow into the role of CTO as the company grows, you should be an equal cofounder with 15 - 50% equity. Read this: https://blog.ycombinator.com/splitting-equity-among-founders/ https://blog.ycombinator.com/splitting-equity-among-founders...
- jinjiaho 7y agoGreat article, thanks! :) His argument is that he put in the money in the first 1.5 years whereas I drew salary. To what extent should that affect the equity split?
- kjksf 7y agoYou clearly got screwed. More accurately, you screwed yourself, because the guy who hired you for 25% less than your market value didn't put a gun to your head. You accepted the job willingly and you rationalized the choice. (for the record, a job at Google would probably bring 2x cash and would be an even better resume builder than a random startup). At the same time, you should stop thinking that rewards correlate with value provided. You think that you should get more money because you created a lot of value. There is not answer to the question you asked ("how much you SHOULD get"). In business, this is governed by BATNA, Best Alternative to a Negotiated Offer. To the person who hired you, BATNA is another gullible young programmer willing to work for less than he's worth. Therefore he will not pay you more than he what he can pay someone else. You, currently, have no BATNA. You don't have another offer so the deal you have is the best deal available to you. Your best option is to learn from your mistake. Start looking for a new job. Interview at 30 places. Collect offers. Either pick the best one or use the best offer you got to negotiate a better offer from other places that gave you offers (including your current job) (if they seem better to you).
- jinjiaho 7y agoSorry, I meant portfolio, not resume. There are companies that are very keen on hiring me because they've seen what I built in my brief working experience. My boss has already agreed to raise my pay once the investor money comes in (we have a chunk coming in soon) and discuss increasing my equity. What I want to know is how much equity I should be satisfied with, because I want to be well-prepared when this discussion occurs. It's a good idea and the company is at a turning point, so there is a chance it will take off. As the first employee and first technical person, I have a much better argument for higher equity here than at any other company, so if he gives me enough I might consider staying. What is a reasonable range for a situation like this?
- plumtucker 7y agoThis is an extremely common situation and, as you might guess, totally unfair. The portion of your salary that is unpaid is essentially a "bet" on the future outcome of the company. You bet more every day, as do others. The betting continues until the company can afford to pay everyone. At that point it will be easy to calculate the value of everyone's bets...yours, theirs, everyone. Your share of the equity should be based on your share of the bets. Think about it. This is the only logical solution. Why should you ever get a percentage that is less than your share of the bets?? Your 1% is a made up number that represents nothing. On day one 1% is way to much because you've done nothing. On day 435 it's probably not enough. To calculate how much you should have use the Slicing Pie retrofit calculator: https://slicingpie.com/slicing-pie-retrofitforecast-guide/ https://slicingpie.com/slicing-pie-retrofitforecast-guide/ You don't have to get screwed.