Loading...
Answers
MenuI have a good opportunity to join a startup, my role will be to design and build a MVP, so far there are 3 people involved.
The founder asked me what I wanted, I know he has has spent a lot of money so far. He told me that there is 1 other who will be holding a share. What is a fair percentage to ask for?
Answers
It really all depends on
- if your putting in any money
- How much your salary will be (market rate or lower)?
- existing investors
- if they're revenue generating
- how long the companies be around
Essentially it's the risk profile of the company that you're coming into.
If it's an idea and your coming in at the ground level and not taking a salary the 50/50.
If it's been around for a while, no investors and some traction or revenue, you'll be paid below market rate, then maybe 3-10%
If it's making money, raised some capital and your a "normal" developer (not a super star) then 1%
The key is that you ask for the Cap Table to truly understand what % of the company the type + amount of shares they're inferring equates to.
10,000 shares doesn't mean much if they have 100M outstanding.
Also, all equity should be vested over 4 years, 1 year cliff.
Dan's answer is spot on. Based on the facts in your question I would guess you're in the 3-10% range, lower if your salary is close to market. I would add that because of the 1 year cliff, having a large equity stake makes you more likely to be let go quickly if you're valuable but not as valuable as expected to the company. I would say that's largely a good thing, but based on your risk profile you may disagree.
One other comment I'd add to the other two posts (which are spot on) is make sure the terms of the equity are clearly understood. Consider both the type you're getting relative to the rest of the cap table (typically it's going to be standard founders/non-protected junk equity) and of course the valuation of the company as a whole. Unlike capital investors there won't be much you can really argue from a valuation standpoint but knowing what (and importantly how) they define as the companies total value will help you understand where your money will be going next and how likely they are to succeed at progressing (30% of 0 is still 0 after all.)
Here are some considerations to help you assess a fair percentage:
1)Evaluate the extent of your contribution to the startup's success.
2)Research the market standards for equity allocation in startups within your industry and region.
3)Remember that equity allocation is negotiable.
4)Assess the time and effort you will invest in the startup.
Ultimately, the decision should reflect a balance between your contribution, market standards, and success of the startup.
Related Questions
-
What are the best books to learn about Leveraged Buyouts and other creative financing topics?
If you want information that matters in "Creative Financing Techniques" find a person with the experience/insight. Most of what is in books is dated. Many of the more creative methods are a function of current tax code and market factors (like QE).CW
-
What is the best way to split equity for three founders?
You are thinking about it wrong. Don't think of your organization as a pie. Think of it as a house. When you add an extension (say a new kitchen) to your house, the value of your new kitchen now accounts for a larger *percentage* of your house, more than it did before. But something else also happens. Your house is now worth a lot more. I highly recommend you watch the series on raising money for a startup by the Khan Academy - http://robt.co/1u1wCsxJS
-
I brought the company from no pricing strategy, no script, no sales process, no sales team, + 800K in sales to 2.5 million. What do I deserve?
It sound to me that you will not be there for a long time. If the owner is not giving you any rights it is a clear sign.. Look like he/she needed a helping hand and that's what you did.. 1- This is not a fruitful relationship between you two and he is not committed to you.. You drove his business and now he is benefiting from your presence.. Collect your money and get out. Do the same thing by yourself and shift your customers to you.. OR.... 2- Set monthly targets to cash out. Say... if you reach 100K/monthly take 25% and if you reach 300K/m take 35% of the incremental in revenue on top of your 25%, sign an consultant contract, get your money on time and leave.. Change your approach and don't get caught up in company equity and shares etc... . if owner is dragging don't drag along with him. Act quick...MA
-
I'm building a team for raising private equity for a feature film of about $250,000. Where's a good place to find people with this type of experience?
HourlyNerd would be a great place to find someone who can aid in fundraising.RB
-
Term sheet is to be signed. In order to determine equity for my investors, what step-by-step approach for valuating the company would you recommend?
The first question cannot be answered as asked. The starting point is agreement on how the investors are to get their money back. Neither you nor your attorney should attempt to value the business. Who you turn to depends on the business itself. There are norms available even for pre-revenue firms but usually not term sheets for specific transactions.PK
the startups.com platform
Copyright © 2025 Startups.com. All rights reserved.