4 ms·

Fair share for a CTO in a Web3 company

9 points by helloAnanas 4y ago

Hi HN, I've been offered a CTO post on a wannabe web3 company. There is already 3 founders, and they are (like everyone else) looking for their technical founder. They all bring 150k to the table, I will not. 1 understand crypto/web3, the 2 others have relations (clients & investors), but don't know much of the space. The project is not wow, but can clearly generate money easily. They will probably pay me 50% market salary, I just don't know what would be a fair % share to ask for without looking greedy. I also don't want to end up with a low amount which would mean I can't influence decisions. My main issue with this project is that I feel like it will rely a lot on me and web3 people who know how to code in solidity are rare. The good thing is they all have strong relations, one of the current founders already made a good exit before. People of HN, what % shares looks fair to you in that context? Thanks to the community

nivertech 4y ago
If everyone is going to be full-time co-founders then each one getting 25% of crypto/equity compensation (i.e. "sweet equity"). If some of the co-founders are bringing an initial investment they should structure it as either a loan or a SAFE/SAFT (which may later convert into additional equity/tokens for them). Are they going to get the same salary as you, or no salary at all? In case they're not getting a salary you can take this into a/c and dial down your sweet equity to 10-15%. If they're all getting market salary, you need to up your sweet equity to 30-40%. Last thing - unlike normal startups which are playing long-term game, Web3 co-s are short-term thingies, so it's better to get paid in crypto itself rather than in equity. > My main issue with this project is that I feel like it will rely a lot on me and web3 people who know how to code in solidity are rare. Coding in Solidity will be an important, but overall a very small part of your job as a CTO. > ... and web3 people who know how to code in solidity are rare. I wouldn't say that, people who can write secure or formally-verified smart contracts are rare, but there are lots of Solidity coders, the whole point of Solidity was to reduce the barrier to entry for smart contract developement.
- helloAnanas 4y ago
  Thanks for this quick answer. True that I will not do Solidity all the time, but in the beginning, yes. I just fear the fact that it will be hard to find good Solidity programmer, as we will have a certain need for smart contract development at a certain point. The others will not be paid for the moment (I will at 50% market). But they are all currently employed and not full time at all. They will be paid and go fulltime when we raise. It's a good question though.
roflyear 4y ago
You're not bringing money, 5-10%.
psyklic 4y ago
Based on your comment, you'll be the only fulltime person until there's funding? In that case, you're at minimum also bringing 150k of value to the table -- even at 50% salary. (Except that their 150k surely will be paid back via loan/equity. Make sure you get the same deal!) It seems you're clearly vital, have a rare CTO skillset, and the company is brand new. So, it'd make sense to suggest being an equal partner -- or even more than equal, since you're risking your salary initially, while they retain full salaries. I'm also very wary that you describe half of the team (>50% of the equity?) by their cash and roladexes, rather than being awesome salespeople/CEOs/web3 people/etc. Are you confident they will be great cofounders, even once their contacts run out?
ioblomov 4y ago
TL;DR: Given four founders total, 25% equity seems like a reasonable starting point for your negotiations, but I don’t recommend sacrificing salary for it. After working for startups as a founder, employee, or consultant for 12+ years, I've learned to treat equity as a bonus and not as a substitute for salary—because no matter how much you trust the founders, any subsequent investors will, by definition, dilute existing shareholders. Those 12 years included a half dozen startups, only half of which I had equity in. In every case that equity ended up amounting to nothing, either because the business ultimately failed or an acquisition diluted my shares to zero. (In the latter case, I got generous retention bonuses, but that was a function of salary, not equity.) I was fine with the equity outcome only because I demanded, and got, market rates every time. Not only do the vast majority of startups fail; the chances of a successful exit are slimmer still. A lottery ticket is no substitute for salary. First-time founders tend to overvalue equity; use that to your advantage.

9 points by helloAnanas 4y ago

nivertech 4y ago

If everyone is going to be full-time co-founders then each one getting 25% of crypto/equity compensation (i.e. "sweet equity"). If some of the co-founders are bringing an initial investment they should structure it as either a loan or a SAFE/SAFT (which may later convert into additional equity/tokens for them). Are they going to get the same salary as you, or no salary at all? In case they're not getting a salary you can take this into a/c and dial down your sweet equity to 10-15%. If they're all getting market salary, you need to up your sweet equity to 30-40%. Last thing - unlike normal startups which are playing long-term game, Web3 co-s are short-term thingies, so it's better to get paid in crypto itself rather than in equity. > My main issue with this project is that I feel like it will rely a lot on me and web3 people who know how to code in solidity are rare. Coding in Solidity will be an important, but overall a very small part of your job as a CTO. > ... and web3 people who know how to code in solidity are rare. I wouldn't say that, people who can write secure or formally-verified smart contracts are rare, but there are lots of Solidity coders, the whole point of Solidity was to reduce the barrier to entry for smart contract developement.

helloAnanas 4y ago
Thanks for this quick answer. True that I will not do Solidity all the time, but in the beginning, yes. I just fear the fact that it will be hard to find good Solidity programmer, as we will have a certain need for smart contract development at a certain point. The others will not be paid for the moment (I will at 50% market). But they are all currently employed and not full time at all. They will be paid and go fulltime when we raise. It's a good question though.

roflyear 4y ago

You're not bringing money, 5-10%.

psyklic 4y ago

Based on your comment, you'll be the only fulltime person until there's funding? In that case, you're at minimum also bringing 150k of value to the table -- even at 50% salary. (Except that their 150k surely will be paid back via loan/equity. Make sure you get the same deal!) It seems you're clearly vital, have a rare CTO skillset, and the company is brand new. So, it'd make sense to suggest being an equal partner -- or even more than equal, since you're risking your salary initially, while they retain full salaries. I'm also very wary that you describe half of the team (>50% of the equity?) by their cash and roladexes, rather than being awesome salespeople/CEOs/web3 people/etc. Are you confident they will be great cofounders, even once their contacts run out?

ioblomov 4y ago

TL;DR: Given four founders total, 25% equity seems like a reasonable starting point for your negotiations, but I don’t recommend sacrificing salary for it. After working for startups as a founder, employee, or consultant for 12+ years, I've learned to treat equity as a bonus and not as a substitute for salary—because no matter how much you trust the founders, any subsequent investors will, by definition, dilute existing shareholders. Those 12 years included a half dozen startups, only half of which I had equity in. In every case that equity ended up amounting to nothing, either because the business ultimately failed or an acquisition diluted my shares to zero. (In the latter case, I got generous retention bonuses, but that was a function of salary, not equity.) I was fine with the equity outcome only because I demanded, and got, market rates every time. Not only do the vast majority of startups fail; the chances of a successful exit are slimmer still. A lottery ticket is no substitute for salary. First-time founders tend to overvalue equity; use that to your advantage.