Startups Stack Exchange Archive

Joel’s equity guide does not fit my scenario. Equity for a technical cofounder?

posted by: chaudharyp on 2015-11-30
tagged: tech-company, equity, co-founder, cto
score: 3

I’m living in Bangalore and the following are the facts:

We are 2 people right now. The founder who had the idea is non-technical and had outsourced the product development.
I joined 1 month after the work on the idea started. I’ve been working full-time on a part of the product as the technical guy for the past month, but the main product will still remain outsourced till the end of this year.
All the investment is being done by the founder himself. I’ll be taking a minimum salary(85% less than what I was getting in the market).

Joel’s guide does not take into account the fact that only 1 person is investing in the company, while the other is drawing some salary. It also doesn’t take into account the scenario where the CTO has joined just one month after the idea.

Can someone please help me with the correct equity split?

Answer 7974

posted by: Denis de Bernardy on 2015-11-30
score: 3

Joel’s method for reference.

Joel’s guide does not take into account the fact that only 1 person is investing in the company, while the other is drawing some salary. It also doesn’t take into account the scenario where the CTO has joined just one month after the idea.

It actually does. The advise it gives is to split 50/50 with both you and the other founder getting an IOU - you for the remaining 85% of your market salary, the other for 100% of their salary plus whatever capital they invest.

One month is nothing unless a) the founder massaged the idea around to the point where he lined up a first couple of clients before bringing you onboard, or b) he has so much money lying around and you such average skills that you’re a replaceable cog, or c) you are naive and inexperienced enough to think that a month without you makes a great deal of difference.

If so then you’re an employee. Bluntly, if the basis of your relationship is to let go of your salary in exchange for maybe stock, you’ll end up with left overs, a few bones, and chump change. So stop leg-humping your boss. Get paid sensibly. And treat whatever stock you end up with as a bonus. Be happy with a few percent. Be super happy with 5% or more. But whatever you do, get paid - this is bonus money, not a salary replacement.

If not then you’re a cofounder. You’re taking the same risks - he’s spending money he has a bit too much of, you’re accepting to get underpaid for time you’ve way too little of. Reap the rewards of your work and get half. And for that matter, brace yourselves to have a third cofounder on equal terms as the two of you if needed in a month or three.

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