Equity in a StartUp
- posted by: john doe on 2017-02-08
- tagged:
equity, payment
- score: 2
I am an iOS developer. I was approached by a StartUp which was interested in using my services to build them an app.
The StartUp already has 6 members. 2 of them are developers (web developers). The startup already has a website. At present non of the members are getting paid since the startup is just 1 year old and they do not make enough revenue.
I was offered 25% Equity in the startup.
My question is that should I be asking for some upfront money for the development of an iOS app. I am a senior iOS developer and my time is extremely important to me.
Should I ask for upfront money 5-10K for development of app and then update the app based on equity basis.
What kind of things people ask BEFORE they join a startup company. The founders of the startup are in their 20’s and I am in my late 30’s.
Any advice will be appreciated?
Answer 12082
There is no definitive answer. 25% equity could change your life or worth less than toilet paper. Ask yourself:
- Do you believe in the business? Are you convinced it’s a good idea, but just need more time for development?
- Do you want to take risk? If you believe there’s huge potential, 25% equity is indeed a very good deal, otherwise it’s rubbish.
- Are you convinced you’re happy to work with people much younger and probably less experienced than you?
- Do you believe in the founders? They might have told you how their idea would change the world. Step back, think objectively, do you really think they know what they are doing?
You may want to ask the following questions:
- Have you ever exited a business successfully? They are in their 20, so it’s probably NO. The risk of a failure is very high for anyone without previous experience.
- What about the other two developers? They joined before you, so they should have at least 25% equity. That leaves only 25% for the founder and three other members in the business. Does that even make sense? You’ll have more equity than the founder???? This is very important, you must find out why. Maybe and just maybe, those other guys are actually being paid, but they want an extra free labor.
- Ok. Let’s assume your 25% equity is genuine, because the other two developers get 10% each. Why? Why would they get less than you even they joined before you? Can they really do their job? Do you want to work with two potential incompetent junior programmers?
- How did the company members (including the two developers) survive for a year without being paid? Developers are highly demanded, why would those two developers do this?
- What’s your title? Will you just do programming? Will you be recognized as a co-founder?
- If you’re asking for upfront money, you should expect less or even no equity (depends on how much they pay). Please note it’s possible to outsource an app for less than 10K.
- What’s the business plan. When will you get paid and so on.
Notes from own experience (that might not apply to you, but …)
- I’m a senior developer myself, but I was offered about decent equity (but less than 25%) and market rate cash for a business that is already generating revenue.
- I’ve seen many examples where the young founders cheat with equity.
- Equity without cash is usually reserved for junior developers or someone who can’t find a job after university.
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