Ask HN: How much equity to accept as the sole tech co-founder in this case? | Hacker News Reader

Ask HN: How much equity to accept as the sole tech co-founder in this case?

11 pointsbuzzthro12 comments

This is for a tech company that has a CEO and a CPO without a prototype, customers or any other full-time hires. They are about to close on their seed funding though and I'll be joining after right after that. The equity will be from the founders pool and the salary is somewhat negotiable between 100k-200k per year before taxes. In terms of the other founders, one of them has a gotten their startup acquired before for 10s of millions (I think - undisclosed figure but I put that number together from the parent company's total funding) and the other founder has no prior startup experience. One of them has some limited tech experience.

What would you accept in this case as the CTO?

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> They are about to close on their seed funding though and I'll be joining after right after that.

Hold on - They are raising funding right now, but planning on bringing you in after fundraising?

If you're truly a co-founder, why aren't they bringing you in now? I'd be concerned that they're using you to secure fundraising, but they're getting the best of both worlds by waiting until after funding to give you less equity than a co-founder.

Be wary of accepting a "co-founder" position where you're being treated more as an employee. They seem to be working to cement their status as the actual founders and add you on later with an arbitrary title.

Do you know how much equity they have? How big is this "founders pool" of equity?

Frankly, between the significant salary and the fact that you're being excluded from the founder's list before seed funding, I think it's more accurate to view this position as a regular post-funding early hire. I think 5% equity is not uncommon in these positions, give or take, though you could be able to negotiate more if they're really interested in bringing you on as an actual co-founder.

> Hold on - They are raising funding right now, but planning on bringing you in after fundraising?

That's right.

> Do you know how much equity they have? How big is this "founders pool" of equity?

They're saving approximately 7% for ESOP and proposing < 10% equity for me depending on my base salary with co-founder title and may be a board seat later.

I think I agree with what you're saying. It does feel like a regular post-funding early hire.

I have a bit of a radical view on this: In order to be successful you have 10 years full of work ahead of you. In comparison, whatever is there today is nothing. If you are co-founders, then it should be 1/3 each and each with the same salary. At least this should be the default. You may have different needs, experience and skill sets and can of course speak about these openly, but 1/3 each should be the default imho.

This is the right answer.

The biggest thing they're bringing to the table is the (supposed and impending) funding. The idea itself is nearly worthless until executed.

Good Tech Founders ARE the hardest founding team members to find.

If you accept notably less, you're always a lesser member of the team. The best founding team keeps equity and salary equal. That's the least chance for friction and resentment.

What I've noticed when talking to non-tech co-founders that come with domain expertise/contacts or business chops is that they tend to figure that they can build an MVP and likely find product-market fit through a combination of founding engineers and contractors out in eastern europe. So they really don't want to give up equity. And later on bring in an external CTO to tidy up if necessary.

I wouldn’t say this is radical, I think PG wrote an essay years ago with this as the core thesis!

+1 for shining light on the decade necessary for success

Are they asking you to choose between salary and equity?

I wouldn't consider myself a co-founder with < 5% equity, and I wouldn't join a team like this unless my cash comp were 75% of my market rate. If you feel super strongly about the TAM and product idea, or need less cash - take a risk! But, for me (at FAANG comp), I would need something like $175-200k + 10-20%.

> Are they asking you to choose between salary and equity?

Kind of yes. Market rate (I'm also FAANG) with less equity or vice-versa. The equity ceiling is at 10%. The way I'm thinking about it is that given the amount of risk at this early stage with no prototype, customers or revenue and the amount of work involved, the expected pay-off for the time and stress isn't quite transformational for me.

I don't believe in giving up work-life balance and cutting my pay in half for the "startup experience". I wouldn't go pay 100k+ tuition for a degree in "startups" - whatever that means.

Post funding, pre product, pre revenue, Salary CTO, with experienced Founders? 5% would be good, 10% would be better

5% is a good number I've seen a few times in the same circumstances. If this were pre-funding you should be asking for a solid third of all equity since you are a cofounder.

For me, 5% sounds more like a the offers I've gotten as first Eng hire, rather than co-founder. A couple months ago, "cofounder" should have gotten this person around 1/3. Now, I think it's reasonable to look around half that - 10-20%, depending on cash comp versus market.

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