I'm a solo founder, and think 5% is way too much. Your classmate has already decided that earning less is acceptable to him. If you're offering him more than he

I'm a solo founder, and think 5% is way too much. Your classmate has already decided that earning less is acceptable to him. If you're offering him more than he currently earns, you're already paying more than market rates. And you want to add ownership in the company? You (and him) seem more concerned about issues of face than issues of compensation. This is dangerous. Quantify the value of your business and the value he brings. If you're not sure how much value he brings (emotional support? you're kidding me!), don't give equity. Come up with a plan to evaluate things in six months, or make a commitment that require hitting aggressive performance targets that are linked explicitly to his work. And make sure things vest. One approach might be giving him the option to purchase up to a certain percentage of the company at a set value. Then figure out the value by asking yourself a simple question: if you had to sell the whole company, how much would you want for it? If he really cares about ownership he can purchase equity out of his salary over time. If he doesn't want to invest that is a warning sign he won't be contributing to growth. And ultimately, remember that friendship and business is hard to mix. You will have a working relationship with him. He could easily come to resent working for you for "so little" at the same time you may come to resent giving him "such a good deal". People's relationships change when money is involved. At least by focusing on the numbers you won't toss away your business for nothing, and can be dispassionate with him when discussing what you can offer.