Startup "Co-Founder" Equity

1 points by chocoheadfred 13 years ago | 2 comments

I'm considering becoming an equity partner in an existing company. I've worked a year with this company, probably 5-10 hours a week. I really believe in the company and think it can be something cool. I've not taken any payment or salary yet.

This SAAS company is making about $5k per month revenue, $3500 profit... so presumably without much effort we'll be at a similar place next year without too much work, if at all. The original founder started the company, quit his job 2 years ago, put $20k into the company, and has been working 60 hours weeks since then. He has yet to take payment or salary for his efforts. He is 55% equity owner. There are two silent partners at 4% each.

I'm being offered 7.5% equity, out of the remaining 37%. I'm expected to work around 20 hours/week for this level of equity. I'm having a hard time evaluating this number. Is it high, low, or what? Just don't have anything to base it own. Any advice?

darkmethod 13 years ago |

I'm a little baffled by your first paragraph. Have you been working for a company part-time for an entire year and have never received compensation from a company that is clearly bringing in revenue?

If you like the work/company that much, clearly 7.5% of $X,XXX is greater than 100% of $0. And you'll still be part-time to pursue other things/ideas/etc.

chocoheadfred 13 years ago | |

Yes, that is correct. The idea is just to help the company grow as much as possible, continuing to hire and pay others first. I guess I've been acting as a partner in the company for a while now but not been an official equity partner on paper.

Yes 7.5% is more than nothing. I'm trying to figure though if that number is low or high. What do you think based on this information? What does your gut say?