Startups Stack Exchange Archive

Equity amount for CTO

• posted by: joslinm on 2014-12-01
• tagged: software, founder, cto
• score: 6

I’ve been working with a business partner on an app. I’ve decided to come on as CTO, and we’re now hashing out how much equity / salary I should get. Here’s the facts:

• The CEO has been working on it this entire past year. He’s been iterating over his idea and had a prototype developed.
• I’ve been taking $1500/week to freelance for him for the past 3 months under the assumption that I will join on eventually. I’m worth $4000-$5000/week from a freelancing standpoint but took the less pay because I believed in the idea
• At my previous startup I was paid 175k + 5% equity. I’m very high in demand.
• I’m developing an iPhone app and until I get a developer that means I will be doing the backend and Frontend programming (both of which I’m skilled and experienced in)
• The CEO plans on giving himself 55%. His father who has paid for the freelancers that he’s hired over the past year will get 20%.
• We live and work in NYC
• We have a great working relationship. We work in the same office and get along great and are always hashing out ideas.

He’s offered me 8% / 125k. I told him I don’t feel like a cofounder at that amount and asked if 15% / 100k was feasible and he didn’t think so. We talked for length about it and I feel like I’m worth a lot more than he’s selling me on.

Is it fair that he get so much more equity and/or am I being unreasonable in expecting more?

Answer 1539

• posted by: Esqarrouth on 2014-12-03
• score: 11

We went through a similar process and checked a bunch of resources to come up with a good split.

A good early stage CTO should get at least 15% and yes you are not really a cofounder under 10%. From what you told me you deserve around 20%.
8% is a joke, I was approached with a similar offer and rejected. Do not work for business idiots that don’t know the value of a good engineer.
They don’t deserve to build tech companies and will fail because of their greed in the future.

Look at it this way, you can probably pickup all of his skills in 6 months. He probably can pickup all your skills in 5 years.

Here are good sources we used, I recommend reading them all:
http://foundrs.com/
http://thinkspace.com/how-to-divide-equity-to-startup-founders-advisors-and-employees/ http://blog.nahurst.com/how-much-equity-a-technical-cofounder-should http://www.forbes.com/sites/dailymuse/2012/04/05/what-every-founder-needs-to-know-about-equity/ http://www.slicingpie.com/

If you want to stay safe and fair try the dynamic equity path, but it takes significant amount of time.

Answer 1536

• posted by: Rocky on 2014-12-02
• score: 7

Here’s how equity assignment was explained to me when I was in a similar situation: when starting up, it’s reasonable to assign the equity according to how much that person will be responsible for the company’s success.

The extreme example would be starting up a new software company with Bill Gates. He does nothing other than put his name on it, while you do 100% of the work and put in all the startup money. He could reasonably expect a HUGE equity stake in the company just because having his name attached will drive sales and ensure success.

In your case, there’s the founder (sales and operations), his dad (the money), and you (development of the product). How much do each of you contribute to the success of the company? What would happen without CEO or the sugar daddy? What would happen without you?

What’s going to happen if you DON’T come to an agreement? Is he just going to hire another developer or does he need you and you alone? If he finds another developer, what would his expectations be for equity and salary?

So I don’t have a specific answer of an exact amount that’s fair to everyone. But phrasing the question that way – “what’s fair to everyone involved?” is a great way to approach the problem when discussing it with him. It sounds like you’re pretty close.

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