Ask HN: How much equity should I give my new co-founder?

7 points by zeynalov 11 years ago | 8 comments

I'm solo-founder and everything goes good for now. But I'm very stressed now and I think it would be better if I would have a co-founder. Our startup is ready and already launched 2 month ago. I found a good guy, that I think he can help me to grow our startup. Now he asks what part of my startup I'm going to give him.

I can't decide how much percent equity should I give him.

He is startup-savvy guy, knows SEO, online marketing strategies, online business growth-hacking etc. No coding skills.

Our startup is SaaS but our business model isn't on recurring revenue. Clients make one time payments.

Margin profit now: 80% revenue (team= me(founder)+3 employee+ 2 long-time freelance developers + tax)

Real revenue in first 2 months:

Oktober - 1st month – 1230 $

November - 2nd month – 9820 $

Revenue Prediction :

3rd month – 11000$

4th month – 20000 $

5th month – 25.000 $

6th month – 35.000$

7th month – 40.000$

8th month – 45.000$

9th month – 50.000$

10th month – 55.000$

11th month – 70.000$

12th month – 80.000$

13th month – 90.000$

December 2015 – 14th month – 100.000$

Total Revenue on end of 2015: 662.050 $

hakanderyal 11 years ago |

There isn't a formula that will work for everyone. It heavily depends on the company, it's niche, it's potential of growth, personalities of owners, and much more.

If you are looking for a simple formula, here is one that I see regularly on HN:

Will you pay him a salary, or just equity?

If it's just equity, %50, with vesting.

If it's salary, than between %0 and %50, with vesting.

alain94040 11 years ago |

You do not give us enough data to help you. What difference will that person make?

A real cofounder should get 10-50%. But first, you should work together for 1-3 months minimum. Once you know you are a good fit, vesting will protect you. Remember that 40% vesting over 4 years isn't that much if you fire your cofounder after one year for lack of performance. That's really just 10% equity for a full year of work, not bad for you. And if it works out, everyone is happy.

zeynalov 11 years ago | |

in first 1-3 month, should I pay him monthly as employee?

smt88 11 years ago |

Don't agonize over it too much. Be generous. Are you paying him a salary as well?

akama 11 years ago | |

I actually disagree. Once you give equity, you are stuck for better or worse. Make sure you have a vesting schedule in place and pay more salary and keep as much equity as you possible can.

smt88 11 years ago | | |

S/he should get the right people and pay them what they're worth. Trying to under-pay people results in sub-par people or good people leaving. 80% of nothing is a lot less valuable than 60% of something successful. Great people are absolutely vital at an early stage.

I'm not making things up here, either. Every successful entrepreneur I know agrees with that sentiment, as does the prevailing philosophy of investors[1][2], thought leaders[3], and serial entrepreneurs[4].

I have never once seen anyone successful say to hoard your equity, especially if you're bootstrapped and cash-flow positive. Greed is a great way to kill morale.

1. http://hunterwalk.com/2014/11/26/one-founder-told-me-he-want...

2. http://blog.samaltman.com/employee-retention

3. https://news.ycombinator.com/item?id=8109

4. http://jamesaltucher.quora.com/The-Ultimate-Cheat-Sheet-For-...

s0x 11 years ago |

I wouldn't give him any equity. Since it sounds like you can afford it, why don't you just hire him on a contract basis and pay him hourly?

notahacker 11 years ago |

Is the projected revenue based on what you expect to make with or without the assistance of a marketing-focused cofounder?