
Ask HN: What % of equity is a technical co-founder worth? - pepdek
At this point I own the idea(worth=$0) and 100% equity. And without a technical partner I have no beta product. He's open to the idea of equity in the company.<p>I'm a business-minded, action-oriented guy. I feel I'm good at team building, marketing, selling, partnerships &#38; strategy. The real business side of things.<p>He knows the technical side. What is fair 15%? 45%?
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dglassan
50% no questions.

You need him or else you do not have a product. No product means no company.

No reasonable developer would take anything less than this...If they're going
to be putting their energy into developing your product for the next 1-3 years
(minimum) then you need to split the equity with them equally.

~~~
pedalpete
agree with the 50%, both of you should be vested.

You want all co-founders to be equally engaged in the company. Anything less
than an even split at the very start sets up a structure where one feels they
are getting less than the other.

You mention the things that you're good at and call it the 'real business side
of things'. Does your 'co-founder' find this insulting?? Is he really just a
code monkey? Somebody who can build YOUR product? If so, he isn't a co-
founder.

If you are building a technology company, all your 'real business' skills are
worthless without a person who understands the technology. BUT your technical
co-founder should be well versed in the market also. Together you will be
making the product market fit. Together you'll be making partnerships/sales
work. Together you'll be building and managing the team.

If you aren't feeling the 50-50 split, I'd ask, is he really a co-founder?

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bherms
When it comes down to it, despite how you feel you're good at "business", if
you find a good technical co-founder, you're going to actually be close to
worthless (considering you get a really good tech co-founder, not just a
programmer). Business is easy for smart people. It's mostly common sense,
personality, and drive. Once you find a really good technical co-founder,
chances are the answer to "Could this business survive without him?" will be
"No" and "Could this business survive without me?" will be "Yes". Keep that in
mind when you think about a ridiculous share like 15%. Start at 50/50. His
shares can go up if he brings more to the table. Yours can go up if you learn
to code.

~~~
mindcrime
_if you find a good technical co-founder, you're going to actually be close to
worthless (considering you get a really good tech co-founder, not just a
programmer). Business is easy for smart people._

I'm sorry, but I have to "call bullshit" on this (as a generalization anyway.
I don't think we know enough about the specifics here to really say if the OP
- specifically - is going to "be close to worthless" or not).

There are particular skills and talents that good people on the "business side
of the house" have, and they're not necessarily things that come easily to
just any smart person. I mean, sure, most reasonably smart people could
probably teach themselves to make cold calls, generate leads, go on sales
calls and close sales... but not to any greater degree than you could say "any
reasonably smart person can learn to write code."

In the end, specialization and division of labor are a good thing, and a solid
business needs people who have chosen to focus on, and develop skills in,
different things... and the business side is no less important than the
product side.

And if you really don't believe me, go round up 10 random engineers with no
selling experience, give them a list of phone numbers and a stack of data-
sheets and tell them to go sell a product, and see how that turns out.

~~~
bherms
I'll give you that... It certainly depends on the person and past experience
and I did generalize a bit based on my experience with technical co-founders
I've known and worked with. When I said a "really good" tech co-founder, I
kind of implicitly meant someone easily capable of or already possessing some
of the skills necessary. I look at myself or some of my successful friends and
all of them are tech co-founders who learned the business stuff pretty easily
and have been successful. In cases like that, if some mba grad tried to sell
them on "oh, i'm a business guy" (which has happened quite often), they'd
always get told to fuck off.

~~~
mindcrime
_I look at myself or some of my successful friends and all of them are tech
co-founders who learned the business stuff pretty easily and have been
successful. In cases like that, if some mba grad tried to sell them on "oh,
i'm a business guy" (which has happened quite often), they'd always get told
to fuck off._

Sure, just having an MBA doesn't mean one is a _good_ "business guy." And, to
be fair, different types of businesses do have different needs. For example,
it's implicit in my diatribe above that I'm referring to the kind of business
that sales to other big businesses, using a direct sales model. And maybe in
some other kinds of businesses it's easier for somebody who's a techie by
trade to just step in and learn the business side of what they're trying to
do.

Of course, once you go down that path, one could ask if you're still "a
techie" or if you're now some kind of weird hybrid thing... ;-)

Anyway, in either case, I also agree that the kind of person who has nothing
but "an idea" and no ability to execute in _some_ regard (whether it be the
business "side" or the techie "side") is of pretty limited value.

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Animus7
Could he do this without you? Could you do this without him?

This is what I ask myself whenever I think of this question.

------
sixtypoundhound
There is no single answer to this question - it's totally dependant on the
relative value of your contributions to the company's success. Where is the
secret sauce going to be?

If you're building a mass-market offering (eg. facebook or SAAS), then they
are worth a lot. New crypto product? New search engine....time to pony up.

If you are in a space where sales and marketing is more important than
technology (eg. a groupon clone or anything where you're reselling an existing
framework), then I'd retain the lion's share of the equity. You aren't going
to win on technology.

Are you putting capital into the deal or raising a large chunk of capital to
get started? Are they drawing a salary of some sort? I'm not giving 50% of the
equity away to an employee or someone who I'm otherwise supporting.

Finally, while this is usually a bad idea, what are the alternatives to adding
a tech co-founder? Can you outsource? Use consulting help?

While the latter is usually an express route to total stupidity (most startups
with outsourced development quickly become comical), if you could truly run
the operation without a dedicated in-house tech person, I'd retain a larger
share of the pie.

Finally - I disagree that "business is easy for smart people" - a good
business person can add a lot of value to the team, particularly if you're
targeting large companies. Many entrepreneurs make significant mistakes in
their deals and delivery process that put their company at risk - a good
business guy should be able to reduce those risks and accelerate the pace of
execution.

And no..I'm not a MBA...I straddle the two camps (business guy who can code
and codes a lot).

~~~
RRiccio
But how do you draw the thin line between a "Facebook" startup and a "Groupon"
startup. There's so much between those two realities.

I have the same question as the OP.

Also... How can you differentiate between a technical entrepreneur and a
coder? Because I'd really be willing to give lots of equity to the former, but
none to the latter.

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bdmorgan
At first glance, I agree with most others that "the idea itself is worth 0%".
Having said that, we all know that's not _always_ true...there's a looooong
list of ideas that were so brilliant at the time of their inception that -
combined with good fortune and perfect timing - the initial crappy
implementation had no real negative impact (hello, Windows 3.0, hello
Facemash, etc.).

So your idea may be brilliant...probably not, but maybe so :-) If you have
already prototyped it out, have a basic wireframe built, have a good business
plan in place, and have some funding lined up (either your own or from some
external source) I would say that a technical co-founder would be _at most_
worth 20-25%. From the gist of your question, though, it sounds like you have
an idea in your head and that's about it. If that's the case, you gotta find
your co-founder and immediately agree to a 50/50 split...maybe give them a 6-8
week 'trial phase' just to make sure they aren't a total fruitcake and are
going to bail out on you, then lock it all down legally and move forward from
there.

What people are trying to tell you in the other posts is that HARD skills >>
SOFT skills when it comes to launching a tech company in the very early
stages. Look at your descriptions:

* "business-minded" - hard to quantify * "action-oriented" - every great developer on earth is this as well * "team-building" - if you were great at this, your first stop wouldn't be at Hacker News for advice on how to build a team * "selling" - I agree that this is actually a HARD skill - either you got it or you don't. If you have demonstrated track record in this area, this is your trump card. * "partnerships" - soft skill...mostly manipulating paperwork with lawyers at the end of the day * "strategy" - you will easily be splitting this one 50/50 with your technical co-founder

Meanwhile, a good tech co-founder is going to bring:

* Specific dev experience - hard skill * Knowledge of architecture and scalability - hard skill * Knowledge of SEO and online technical marketing - hard skill * Ability to augment his/her skill with other good tech people out there, selecting from their own personal experience or interviewing based on their own skills - hard skill (i.e. business guy has no hope of locating and finding these people, IMHO)

Sorry for the long explanation. Bottom line: you gotta go 50/50. If your guy
is not worth 50% in your mind, you have the wrong person.

------
allanchao
Sorry, but usually idea is worth virtually nothing. Having been a technical
co-founder before and now the business founder, I've been on both sides of the
coin. Unless you have actually built a profitable business before, it's very
hard to justify the value that _you_ bring to the table.

The technical co-founder already has experience and pretty much knows the
issues he's going to face, and how he's going to handle them. If you haven't
built a business before, then you do not know the issues that you'll face or
how you're going to handle them. So his value probably far outweighs yours,
even though it's your idea.

------
krishmv
Just wondering if there's a bit more to this than the idea vs. execution
argument. Isn't a terrible idea well executed as bad as a great idea terribly
executed?

What about skin in the game? If one's invested more capital, or has given up a
job earlier to do things like research, talking to customers or building a
prototype, his risk is higher and shouldn't he be rewarded for it?

Wouldn't expendability matter? What if the business guy can get a good
development team to build the product (there are shops that work for equity)
more easily than the technical guy hiring a capable sales agency (there are
agencies that work on commission)?

------
gersh
How many customers do you know? How close are you to potential customers? How
much time can get your potential customers to spend helping you with the
product? Now, take the ratio of the amount of time you can get potential
customers to help with your product to the amount of time it will take your
technical co-founder to develop the product.

------
nwp
I'm of the opinion that co-founders should split the equity as evenly as
possible.

------
krisrak
technical co-founder should get >50%, he can build product without you, u
cannot without a technical co-founder. If you are a marketing guy then try
starting business like groupon that requires more marketing and sales talent
than technical talent at its core. If the core of the product relies on
building good web app/mobile app then technical guys don't need you, if the
product is great people will come onboard without help of any marketing guys.
This does not work in case on businesses like groupon, which relies on
building partnerships with good brands, that where pure marketings guys should
focus on building.

~~~
kls
I am not sure I totally agree with this, If the non-technical co founder is a
business dev and sales guy he is just as important to the equation. And I
would say there are a good deal of technical individuals who should not have
controlling interest in the company. I say that as a 3 time CTO of start-ups
and a very technical person. I was in no way qualified to be the controlling
party of any of those organizations. I have a good business intuition, but my
partners where way more qualified in what they do, if I held controlling
interest, I may have forced issues that I was wrong about. I agree with 50-50,
but if I where investing in a company I would be leery of a company where the
technical and not business partner held controlling interest.

------
JoshKalkbrenner
50% Unless you have cash.

------
mitchf
85% Tech Founder, 15% Business Person. It's not the idea, it's the execution.

~~~
keiferski
Really getting tired of the constant reiteration of this soundbite. It's much,
much more complex than that, and the constant chanting of "ideas don't matter"
just leads to groupthink.

For example: what if the bulk of your product is copy (writing) or design? All
it needs is a simple account system and framework built around it - the
majority of the work is _nontechnical_. That's not to say that it is easy or
simple; rather, the work is just not technical in nature.

 _Technical_ execution deserves 85% in a tech-heavy startup. Technical
execution deserves far less than 85%, probably even less than half, in a non-
tech-heavy startup.

The OP didn't specify "what" his site is about, but regardless.

~~~
levifig
And I'm tired of the constant rebuke of a perfectly good soundbite by people
that have no idea of the distinction of "idea" and "execution". Design and
copy writing are as much part of "execution" as code is. They are also as
technical as code is, just not your idea of technical.

Good ideas with average execution are forgettable. Average ideas with great
execution are memorable.

~~~
keiferski
Now you're just arguing about definitions. "Technical" = coders in 99/100
uses, especially for the OP.

