equityWe are not startup, but a company that develops web applications for other businesses. In the beginning we were only two partners. He made all investment and maintained sales related things. I am responsible for all development related stuffs and guiding the other developer and designer. At that time we decided to 40% to me and 60% to him as he was whole investor and he was paying me some money (though much less than market) to pay my bills.
Now after 1 year we are realizing that we cant handle all work so we decided to add one co founder who will also invest some money and help us to reach more market.
So in that position my friend suggested 50% to him , 25% to me and 25% to new person and some basic pay to me.
Is it a fair division of equity or not?
Just like there is no set price for how much you should charge for a website, there is no set price for how much sales, development, and other services are worth inside a company. It really depends on how much each of you are worth to the other. Can he find someone else to develop for a smaller percentage? Can you find someone to sell for you for a smaller “commission”?
If that is the best deal you can find, it is fair. If you can find someone to provide the same services and give you a larger piece of the same or larger revenue, then grab that opportunity.
As a developer, I have found it worthwhile for me to give half of the revenue to the person or team that handles sales, customer service and bookkeeping, but if the other person is also sales or marketing the percentage going to actual development is getting pretty small and when you have to add other developers thing could get even tighter.
Short answer, it looks like you might be getting the short-end of the deal, but 25% of something is more that 100% of nothing. You can ask for more but don’t walk away from the deal until you know for sure you have found a better deal.
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