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Is he looking for a cofounder, or an early employee. For an early employee, that is a massive amount of equity. The equity is to compensate you for the risk you
by elmin 12y ago
Is he looking for a cofounder, or an early employee. For an early employee, that is a massive amount of equity. The equity is to compensate you for the risk your taking in joining an early stage company, but you're not taking much risk, your getting a very reasonable salary, and the company is already over a year old.
- joslin01 12y agoHe's looking for a cofounder
- fsk 12y agoHe's looking for an employee that he can trick into believing he's a cofounder. - unequal equity split - business plan was decided before you joined You would be an employee and not a cofounder.
- joslin01 12y agoThank you I totally agree, and it's been my main concern. I keep telling him "I don't want to be employee #1. I want to be cofounder"
- fsk 12y agoLet's do some arithmetic for you. At 125k/8%, you're giving up $50k salary for 8% equity. At 100k/15%, you're giving up $75k salary for 15% equity. But it isn't 15%. If it's a typical 4 year vesting, it's only 3.75% per year. So you're giving up $75k salary for 3.75% equity in the company. That implies a current valuation of $75k/0.0375 = $2M. But you are a minority shareholder. You could do a great job, deliver a great MVP, and then be fired after 11 months with nothing (if it's a typical 1 year cliff). The founder could give a sweetheart deal to friend investors, diluting your equity. Your shares are common, not the preferred an investor would get. So the CURRENT VALUATION of the company needs to be a lot more than $2M, for this to be a sensible risk for you to take. There are two disasters that can happen to you. The startup could fail and your equity is worth nothing. The startup could be a smash hit success, and you get cheated due to your status as minority shareholder. So you'd be better off keeping the job that pays $75k more CASH, and investing the difference. I doubt his idea is that super-brilliant. The fact that he went this far without a technical co-founder shows that he doesn't really value that aspect of the business. You'd be better off saving/investing the extra $75k salary, and then self-angel-investing in your own startup later, where you could be a TRUE co-founder. Also, as the above people said, a co-founder does not normally draw a salary at the beginning. They are expected to work for equity only, which seems like an idiot move for someone who could get $100k+ CASH as an employee. To give up that much salary, you'd need to be getting half of the equity or even be a controlling shareholder. So, keep the job that pays $175k, save up the difference, and invest in your own startup someday where you could be a TRUE co-founder.
- fsk 12y agoAnother way to look at it is: If this guy pitched to you the idea of investing $75k cash in his startup for 3.75% in common (not preferred, no liquidation preference, no voting rights), would you do it, or would you laugh at him?
- ehurrell 12y agoCan't agree with this breakdown strongly enough. Uneven equity is one of many indicators that your co-founder relationship won't be a balanced one, and from there there are a lot of toxic things that can happen. At the end of the day you have to trust your co-founder, and a big part of that is them respecting your contribution enough to give your say weight.
- joslin01 12y agoWow. Thank you so much for this.
- rajacombinator 12y agoI agree with this comment . But I also think OP is looking for a first employee position, not a cofounder position. 100k is not a cofounder salary.