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Startup Comp?
Question from a noob. I have a pretty good understanding of comp packages for my startup. But, I've got a situation that I need advice on.
I've been communicating with this dev and he fully understands my idea. He says he wants nothing to do with a partnership. I understand, I've been burned too.
So, we agreed that I would license his code. It's a pretty significant licensing fee ay $30 per month per install then $10 per month maintenance. Good position to be in right? Yet he wants 20% of the company when I sell it. Is this typical?
I'd like to have an understanding of what the normal package for my first dev should be to be entirely fair in this particular situation.
- dustingetz 2y agotypical billing structure is time and materials or cofounder equity or sometimes stock options, this is not a structure i’ve seen before. note that the point of equity is long term retention (it has vest and cliff) - unclear if dev will be motivated here unless you have a very clear path to 100s of paid installs in <6 mos. and if so, it’s better for you to find the cash to pay them somewhere else (e.g. day job) and keep the revenue.
- rjewett459 2y agoI totally agree that if any equity is given, it needs to be vested with a cliff. And I believe that we have a disruptive path to well over our targeted goals. My gut says that if I truly respect this guy, which I do. To offer some equity, just not 20%. Would 5% be an insult to him?
- rahulramesh82 2y agoIf you're just hiring a dev as your first employee , it's most probably a bad decision. Your first hire should always be your co-founder.(unless you already have a product). It should atleast be someone who's willing to work with you on the product , who has or wants to share your vision . Someone who either loves your idea , or someone who's passionate in working in the industry. Either way , the person should feel invested in the company , so just paying him for his code won't be a ideal option . I mean , think of it , if you're paid for your code , it means , you get paid almost $4000 /month even when the idea gets only 100-500 installs . So they guy doesn't need to work his ass off to see the idea succeed , so he doesn't have any real commitment. So i would suggest finding someone who's passionate and giving them smwhere around 20%-40% equity , based on how much you think they wld be contributing . It is also important that they don't feel that they're being ripped off , cause they're your partners
- rjewett459 2y agoThanks so much. That's a lot to absorb... Appreciated.