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What should I ask for as compensation after becoming fully vested in my startup?
I am on the verge of becoming fully vested after a four year stint with my startup. I currently have a 10% equity stake in the company and take a 75k/year salary. I am going to be negotiating updates to equity and/or salary once fully vested at the end of 2013.
The company went live in 2010 and we are looking to exit sometime in 2014 via acquisition in the 10-20 million dollar range.
I am a co-founder of the company. We have 5 total employees, with the CEO being the primary stakeholder at 80%. She takes a salary of 45k/yr. We aren't going to be adding employees at a large clip or giving away very much equity in the company at this point.
We bring in close to 1M revenue/yr. I have coded about 95% of the product (and it is a pretty large product).
Thoughts?
- gautamnarula 13y agoDoesn't seem a bit imbalanced that the CEO owns 80% of the equity and you own 10% if you built 95% of the product and co-founded the company? In this situation it's clear you should have more equity, so you should negotiate an increase. I imagine you have a fair amount of leverage, since you basically built the product singlehandedly and therefore know much more about the technical side of it than anybody else. My guess is that the only reason such an imbalance would exist is if the CEO put in a lot of his/her own money to bootstrap the company.
- arkades 13y agoAgreed, though I imagine you need to have a response handy when the CEO mentions that part of the trade-off was that you brought home twice the salary he did during the high-risk "will this go anywhere?" times. If he was also the primary investor to begin with, I don't imagine getting too far with the negotiation, although you certainly have significant wiggle room.
- acreby 13y agoGood advice and you are spot on regarding the imbalance - the CEO put up the money in the beginning.
- mchannon 13y agoI think I share the thoughts of a good amount of the readership of this board by saying I wish I had your problem set. What we don't know is how much of the business value was from the CEO's superherolike skills to sell the product and raise money from fickle investors on favorable terms, and how much was from your superherolike skills to write the product. It may well be that you negotiated a better deal than the CEO for the value you contributed from a market perspective (probably not the case but we don't know from here). We also don't know if the value of your equity would crater if you took your BATNA and walked away from the company (causing the company to lose customers from crashed coderotted servers, etc.). Based on this limited information, I'd leave the equity situation alone, ask for a bump in salary to where you're able to continue working without feeling foolish, and then invest part of your million dollar cashout in your favorite HN reader's startup.
- Sealy 13y agoCongrats, 10% of a $10 million company makes you a millionaire. I'd recommend helping the founder with the exit, have you thought of using a vc to help with your exit? A big part of their jobs are related to selling companies and even if they ask for a small cut, if they get you a higher acquisition price, you benefit. Who owns the other 10%?
- acreby 13y agoThanks for the reply! The other 10% is split amongst the 3 other employees that we have. RE: the VC route, we were looking at M&A companies (just started though), so that is good advice and will investigate it.