Now I've started getting clients that are interested in purchasing, and will need to start making improvements.
What should I give equity wise to CTO/1st engineer hire coming on? This is still part-time.
But even if I am a developer myself, I disagree.
There is a tendency on HN to consider the technical people in a company as the ones that contribute the most. In my opinion, that is often not the case.
In fact, someone even called you "the idea guy", as if all you did is having the idea.
I think that, as others have pointed out, the sensible approach is to split equity based on the value brought to the company. But value does not equal necessary effort, time spent or "tangible" output in the form of code.
While a CTO might spend a lot of time building "tangible" assets which are definitely important, that is not the only value brought to this company. There are assets other than code.
You went through the process and the risks of validating the product and bring in the first customers. Those are assets too and are what makes the business exist in the first place. Without those, all the code a technical person can produce is worthless.
So I would say you should consider the value this CTO will bring to the company and compare it to the value you already brought yourself and will bring in the future.
All in all, though I think that proposing anything from 50% up for the CTO like others are doing in this thread is not reasonable.
Also consider that with an even split, it will be hard to take a decision when you disagree with each other. Someone must be able to have a final say on each matter. Since I doubt you want that person to be the new one you will bring in, I would say that their share should be from 49% down.
Finally, it's not in your question, but do you need a technical founder? You might, so you are the only one that can answer this. But also consider that, since you have clients that will bring in revenue, you can just use that revenue to hire someone on a contract basis first and on a stable basis later, without slitting the equity.
If your startup sells shoes or something the CTO isn't nearly as important.
As someone who has been a VP of Eng and/or CTO in multiple startups, I'd love+ to say my value was the most important, but the truth is that simply isn't correct. It's a team effort and everyone has to be putting in effort to succeed.
+ - actually, I wouldn't, but you get my point hopefully ;)
You're right, I may not need a CTO. I would love to bring on someone to do part-time work as it comes up, until revenues start coming in. Scaling up from there and having that person become the CTO and grow into the role would be ideal.
> CTO will come on to make updates to the product and make it even better/fix bugs.
Let's be realistic here. Based on the statements you've made, it's very clear you're not looking for a CTO nor are you looking for a partner. You're just looking for a programmer. So my suggestion is you cut with the bullshit and just hire/contract someone, and don't give up any equity.
If you and your future CTO will be equal partners with equal responsibilities the remaining equity should be split in half.
"Non-technical founder" often translates to "the idea guy". This might or might not be the case here but you should definitely ask yourself what you'll be bringing to the table before bringing a partner into the game. If he or she will do most of the work while your contribution mostly is the original product idea that's a recipe for trouble once business doesn't run as smoothly as you wish (which it inevitably will at some point).
I'm a VP of Sales at a startup, and have done the design, product fit, and selling. Literally everything aside from coding.
> ...I hired a contractor out of pocket to finish up.
?
Also, if your friend gave you 80% of an MVP without any compensation, watch out: You might not actually own that 80% of an MVP.
Fairness, and the perception of fairness, is much more valuable than owning a large stake.
For example - let's assume that building your MVP and maintaining it for 6 months until you're able to cover maintenance and improvement costs, would cost you around 30 000 $. Then let's multiply it by 3 or 4 and get around 100 000 $. Let's say you're certain that you will be able to pay out 500 000 $ in dividends in the second year. That amounts to about 20% equity share.
Also, it would be very good to give cash as well. Depending on the amount of the equity share - 20-50% of the market value for the job involved.
Presumably, someone wrote the program which you have been contracted to provide to customers? Why can't you go to the original party who wrote the program? Is "contracted" the correct word in your case? That would mean that you have already entered into a written contract to provide something to customers.
Or, are you saying that you entered into a contract to purchase a program, you showed the program to some people, they want some changes, and you need someone to change the program?
I wanted a product made for my own use case, so I paid someone to make it. Now I'm showing people, and there are minor changes they'd want.
Regarding a CTO, though, maybe a business manager would work for you. That certainly sounds cheaper to me, and you'd still control the product direction if desired.
> I currently own 100%...
This is not a reassuring combination of facts. You should start by giving the people who built your product some compensation.
Start at 50/50. Its on you to justify more for yourself.
This is not what I suggested . If you want a junior as CTO you can find some in dev bootcamps, universities or startup events.
Could a developer do your job plus his own and thus own 100% of the business? Some developers can sell too.
CTO will come on to make updates to the product and make it even better/fix bugs.
You won't have a "real" product market fit until you have 20 "solid" customers. "Solid" customers are less likely to churn and use your product on a regular basis. It always takes longer for the deals to close and the money to hit about bank accounts. Of course this depends on your deal size too.
As far as equity is concerned if you want a co founding CTO you need to part with at least 20%. The CTO should feel invested enough. With low equity, he/she is more likely to leave you on first signs of trouble or slow down.