5 ms·
Starting Equity Offers
Here's an interesting question.
The situation: Say you're in the process of a starting a venture and you meet a great person who you think would be quite helpful as a manager. He's in the same position as you: a young budding entrepreneur who believes in your idea. He's aware of the fact that startups don't have much capital to work with at the beginning and will accept an equity deal.
Now for the question: What is a fair percentage to offer? Enough that will make him want to join and have a good vested interest, but not so much that you aren't giving away too much - an offer that is fair for both sides, the founder and the newfound manager. For arguments sake, assume the valuation of the company is around $1,000,000.00.
What do you guys think? I can imagine a bunch of us have found ourselves in this situation and will find ourselves again stuck with this. I'd love to hear thoughts and rational.
Discuss away!
- jjellyy 13y agoits really hard to tell without knowing about your situation. Do you expect 40hrs(+) of work per week ? Is there any cash involved ? If you dont expect 50hr work weeks, and your still in an early stage where you just need one of his relationships, or to have him focus on closing a deal, you can make their options performance based. Maybe start at 0.5% If you want them to be in the trenches with you working every day, and there is no cash involved I would do 3-5% maybe more/less i dont know if you have a cofounder, or your business model. If there is cash involved and you can pay something like 40k a year, then start around 1%-1.5%. 100% might sound like alot to begin with, if you are successful you will need to have alot of it in reserve to hire talent, i would put aside 25% just for talent. Engineers are very difficult to find and will be offered high cash salaries as well as large equity packages.
- adammoisa 13y agoThanks for your reply!