I'm a solo non-technical Founder who's bootstrapped his way to a successful MVP with a part-time equity-compensated developer. I've now finally found a FT technical co-founder who is a much better fit to take us to the next level, but he understandably wants at least 20-25%. My currently part-time developer (who I can't afford to completely lose) only has 10% and is now offering to go full-time for increased equity.
How do I communicate to my existing lead developer and other equity-compensated employees that someone younger, joining at a later stage, deserves 2-3X more equity than them without having them quit on the spot?
I know this moment all too well. I've been on both sides of this one, and let me say - it's not as scary as you think.
If the new hire comes to the table with more to offer than previous hires, then it shouldn't be something you have to "sell". If you think you need to "sell" this new hire to your team and make great strides to prove his/her value to the team, you may not have the hotshot you think you do.
If your team is in it for the product, the vision - your vision, then they shouldn't be as concerned with the fact the new hire will be taking on more equity than they have. They should be on board with the idea that if this is THE guy to get things done, that they're that much closer to hitting the goal.
If you want to hop on a call and chat through the scenario and not talk about it in a semi-public forum, let's get on a call.
That is a touchy situation but you need to make hard decisions when involved in a startup. I am assuming the new Technical co-founder has more experience than the original team member. If that assumption is true, I would sit him/her down and say, as you know 25% of a small company is not much, but 5% of a huge company is significant. If we can attract this new CTO, I believe we can take this to the next level. I need you of all people to be onboard with this and be my eyes and ears when it comes to the engineering team.
I believe that every entrepreneur eventually has gone through a similar situation, the decision is not easy but yet it is not difficult to answer. In my opinion there is now capable people at very young ages and that must always be one of the reasons why they offer more advantage over some other team members even when they have advanced ages. Looking at your question, you mention that the new developer will be considered as co-founder and will be available full time, your current developer was just part-time.
If you're already taking the place of co-founder I think you know the experience that his have, how it should be communicated to the team, I think that you should always be putting the advantages to the resto of the team members of the important to had in the company a person with that ability, experience and knowledge that currently the new developer has.
In summary the facts are those that will give the result of those actions were taken, if the team is mature enough will understand clearly that this new developer gets a larger percentage in stocks Company because the expertise that him or her have, if for some reason a collaborator show anger or discontent I think the shirt was never enough to start taking the project forward.