My partner and I have been able to bootstrap the business so far and develop a fair amount of functionality. Hiring contractors, though, has prevented us from moving the product development along as quickly as we would have liked.
Hence the need for a full time developer that has some skin in the game. My thoughts are the following:
Salary of around $100K per year
Either performance based bonuses or vesting schedules to earn a modest amount of equity.
Goal: Incentivize the developer from working hard for us but ideally not looking to give away equity.
It looks like you're not looking for someone who can scale and become a full fledged CTO (or you might not even need one), so try to look at it as a founding engineer hire instead.
With early founding engineers, you can sell them on things like:
- opportunity for learning
- understanding business practices and models
- opportunity for leadership down the road
And the equity structure should be something around 1-5% of the business vested over a few years. You'll have to sit down and explain it to them as some people either aren't educated or they want to be assured of exactly what they're being given.
I did this a few times last year and if done well, you can get some solid work out of them :)
Feel free to call me up and chat about it more.
SImple and easy. Cash + equity. Equity should be based on a vesting schedule, most common and probably most "fair"
-1 year cliff (no stock vests until he/she is with the company for a year. This prevents bad fits from walking away with a chunk of the company)
-4 year schedule
-Monthly vesting for the next 36 months
This is pretty much the gold standard for tech hires.
The % equity is going to be up to you and the new hire. Ballpark 2-3% depending on a multitude of factors. For a better benchmark, I'd recommend checking out AngelList's hiring product. You can certainly see what other companies are offering in your area in terms of cash/equity.
You can offer Salary + Equity. Draft an ESOP to keep the technical staff motivated.
Salary + Bonus + some type of equity typically set up as options. At this point, I would not be giving out actual stock but rather allow this individual to participate in the stock option plan.
From the brief description, this hire seems to be a first technical hire and not a technical co-founder. If you are paying market rates in terms of salary + bonus compensation then the equity component should be at the market level, potentially around 1%. However, that will get diluted as additional equity is distributed. Fred Wilson gives a good class on "Employee Equity" for free at https://livestream.com/Skillsharelive/MBAMondays/videos/490550
Definitely 4-year vesting schedule with 1-year cliff as suggested by Adam Lieb.
Make sure you have NDAs, assignment of invention agreements, confidentiality and good employment agreements in place. That will make a substantial difference when going out for funding, in the case of any disputes, and for acquisition.
Also, ensure you have a solid development plan adequately communicated. This should define what developers should pay attention to (ie. security must be included in all development protocols) and no outside software as modules without approval from management.
Work through these issues on my last company from initial developer through to large development team, both in-house and off-shore.
Let me know if you'd like to discuss any more.
