equity, contracts, employee-compensationI have been working in a small startup company in Portugal (two owners and two employees) for about one year now, my contract is a standard employment (no additional bonuses or other benefits).
The company as few products, including two legacy systems (build buy another collage, which actually brings money in) and a new product in development (which right now brings no money).
I am working as the only developer on the new product. A part programming, I am involved in defining its vision and many other aspects. My role it is essential as expressed to me by the owner on several occasions.
Some background information: The new product is very particular. Before my employment, they tried to build an early prototype with no success. The company have difficulties to find good employees because of its geographical location, budgeting and technical skills set required for the task. I have in a very good working relationship with the owner.
I decided to join the company in the first place (with a below average salary initially) mainly because of the excitement to work on an interesting green field project with the lure of the possibilities of growing.
After my 3 months of employment I was able to negotiate a better base salary (still with no additional extras) with also a promise to receive more (not specified what) when the product will start to make some money (which could potentially begins in another 1.5 year).
During my first re-negotiation my employee expressed to me his worries of me leaving the company, and I believe he tried to be generous as much he could with his new offer.
Even if I have great excitement for the product and the working environment, I am aware of taking risks in working on this startup.
First of all I am losing immediately some income (calculated at 16%) compared with other job vacations which offer immediately better salaries and additional benefits from the start.
We are near to a a first release of the product, and the owner is currently looking also for an investor.
We are now in an early stage of negotiation for some additional rewards for my loyalty and risk taking in working on this project.
The owners want setup a new separate company for the new product and are talking about provide me a share in the company (with limited responsibility) for an amount from 1% to 2.5%.
My questions:
What are the information I should ask in order to calculate my potential income, for example I am aware of a pre evaluation value of the company and forecast in the next upcoming years. What other key information could I need? Am I entitle to this information?
Is a share from 1% to 2.5% fear and reasonable? Considering that I was working with below average salary with no extras and that real money could come in another 1.5 year.
The company seems really keen to keep on board on the long term, could be an increase of share related also to the years I stay in the company? What are reasonable values?
What other form of benefits I could ask, apart of arbitration bonuses in which I have no or limited control?
Some related articles I read about the topic: http://business.stackoverflow.com/blog/2014/07/16/keeping-equity-in-mind-for-early-stage-software-developer-hiring
I understand that there is no clear cut answer here, but I rally keen to know some suggestion from the community.
Thanks in advance for your feedbacks.
A few related questions on this site (among others) that you may want to look into:
TL;DR: It sounds like you’re currently somewhere between late founder and an employee. It’s not clear whether you’re best described like one or the other - only you can judge which best describes you. At any rate though, if you feel you should be a founder, then by all means get a founder’s share of equity - which 1-2.5% is not - for taking so much risk. If you feel you’re an employee, then get paid properly because you won’t recoup your opportunity loss if the startup goes downhill, and keep in mind that you should see equity as a bonus. Either way get things in writing.
If all else fails, don’t miss that your BATNA is you going to work at another company that pays you properly. As you negotiate, keep in mind that you owe nothing to the founders. Don’t stick a gun to their face saying “pay me or else” of course, but you hopefully get the point: you’ve been accepting a low pay for months and without any agreement in place with respect to equity. It’s far time that you fix both problems and get a proper agreement that you’re happy with in place.
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