Ask HN: I have 5 % stake in a startup, how much should I work?

5 points by bhdzllr 7 years ago | 11 comments

I got 5 % stake in a startup because I do technical work for the founders. I have created the website with an online shop and some individual functions in the background. Currently I have invested about 100 hours, the founders knew this beforehand. I get a one-time payment of around $1000.

We have discussed that I can do some work during the year, the question now is how much time should I invest? How should I value it?

* Should I work 5 % of the hours that I would normally work in a year? * Should I measure the time based on the expected profit that I could end up with after this year? * Are there any other measurements?

Apart from the startup, I work full-time in a company.

tboyd47 7 years ago |

Your 5% stake is not 5% of a full-time job. It's compensation for the work you've already done. You earned it already.

Value your time at the same rate anyone else with your skills would command. Even if you're waiving compensation, value your time at a market rate and keep track of how much compensation you have waived.

If you want to know how much your 5% is worth, ask the founders how much they would pay to buy you out.

rafiki6 7 years ago |

Separate your 5% stake (i.e. your ownership in the company) from your salary as an employee of the company (the amount of money your labor is worth). Calculate how much that labor is worth on the market and see if the 5% stake is making up the gap. If not, then you are getting a raw deal. If so, then you are just fine and should work your normal hours.

mrfusion 7 years ago |

Any value you add to the company you get 5% of that. That’s about all you can really say.

mars4rp 7 years ago | |

And if he thinks others are adding 20x the value he is adding and are not getting paid as well. Working on it is not such a bad idea.

But I doubt non technical founders are adding 20x value at this stage!

dudul 7 years ago |

> Should I work 5 % of the hours that I would normally work in a year?

That is an odd idea.

Honestly, I feel like you don't provide enough details. All in all, it depends on if you think this startup can become a big thing. If it does, 5% ownership can be a really great payout. It's for you to decide if the opportunity is worth your time or whatever the founders are paying you.

scaryclam 7 years ago |

I hope they're paying you a rate for your work alongside the stake. Working for free is a mugs game. The stake is worth nothing at this point, so no, it's not payment in itself.

That aside, holding down a full time job and committing to other work as well can be tough. Do as much as you feel you can, but say no when you want a break. Burn out is no fun.

That aside, how much you work depends on you and what you're willing to do.

But again, stakes are not payment, so don't work for free.

pryelluw 7 years ago |

So, 100 hours and got paid a $1000. That means you worked for $10 an hour. Not great.

The 5% stake is worth nothing at all. It might even be a liability in the case this company is mismanaged.

Id go for money (more this time) and shared (mostly because you seem to see value in them).

If you need help negotiating, let me know. I can help out.

natalyarostova 7 years ago |

Just value it like you would any other choice to work. Expected value of an hour working = (increased probability business succeeds due to an additional hour of your time) * (expected value of potential cashout based on how you value their product/idea).

quickthrower2 7 years ago |

Best bet is to keep your 5% lottery ticket, and go work somewhere to get a slice of another pie, or more money.

tjkrusinski 7 years ago |

The sky is blue, what is that dogs name?

gesman 7 years ago |

Because you do technical work for the founders, here's a quiz for you:

You own 5% of common shares in a startup and startup got an $10M exit. How much did you get?

A: $500K

B: $50K

C: $0