

Ask HN: Equity Splits - anon314159

First, I want to apologize for posting this under a new account - I am a regular and active HN participant, but just need some anonymity for this.<p>I've found two recent business school graduates (a top tier school like Sloan, Chicago, Harvard, Wharton, Stanford, etc.). They have an idea for a software/web startup and a lot of the business scaffolding in place (prestigious board of advisers, lawyers, industry contacts, etc). Neither one knows anything about code/computers though.<p>When I met them a few weeks ago, they had no code, no app, no users - but over the last few weekends I hacked together a quick and dirty prototype from scratch. They were impressed, and miraculously parlayed the prototype into a verbal funding offer (in the $1-2Mil pre-money valuation range). I did the prototype for them out of good will and the desire for experience.<p>Now, they have offered me a CTO position, with the condition that I will continue to work part time for the next few months until they are funded (they want to launch before raising capital, as they expect it will greatly raise the valuation). Once funded, they will hire me on as a full-time CTO with a salary. The vesting agreement will have me slowly gain equity as we hit technical/business milestones, and I should have an ~10% pre-dilution stake if all goes according to plan (they've put this all on paper and I'm having my lawyer go over it now, but it seems kosher at first glance).<p>On the one hand, I will be building their product from scratch, which makes me think I deserve more - but on the other hand they have a lot of strategic partnerships, etc. that I don't have. I expect this venture would never gain traction without their connections (one used to work in the industry and the other used to work at a major VC firm, plus they have several big-names as advisers).<p>Technically, I'm very interested. Their startup touches a lot of fields I'm interested in, and I have complete free-reign over technical decisions.<p>If it's relevant, I'm 23 with no college degree (in school part time now). I worked at a startup as an employee once before, and currently make a little over $100K/year at my day job (not a startup).<p>Their ideal exit would be an acquisition in the ~$100 million range (not entirely unprecedented) within about 5 years. After the two major rounds of funding they expect it would take to get us there, my equity would be diluted to ~3%. Realistically, I understand this is a long shot, and, more likely than not, my equity will be worthless. I do like the idea of being able to put 'CTO of ~$10M company at 24' on my resume though. I hope it would give me the experience and connections I need to start my own company a few years down the line.<p>Any thoughts? Is 10% completely too little equity for the work I'm doing?
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Travis
10% isn't unreasonable for what you described. You'll learn a lot from them by
being involved, it sounds like. And again, it's a long shot as with any
startup.

My startup has offered 2% pre-dilution to a coder who will put ~200 hours into
a project that already has about 800 hours on it. So he's putting in around
20% of the code. Dunno if that helps you, but that's what we're doing.

