

Ask YC: Employee as a partner - quicksilver1024

Hi,<p>I'm considering of making one of my employee at my startup as my partner. He's very talented and I would like to keep him in the company for as long as possible.<p>My startup is 1 week old and I had already considered in making this employee my partner at the beginning.<p>My question is how much of the company should I share with him? Considering that he is a paid employee who did not contribute any funding into the company, should I still pay him the wage I am paying him now (several dollars above min. wage at this point with 1% profit-sharing) while asking for some cash investment into the company? He is asking for 25% of the equity...<p>Thanks a bunch.
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noonespecial
I'd say if he wants 25% of the equity, he should be paid no more than 25% of
what you are being paid. Less if you invested cash up front and he didn't.

What you don't want is to let people have it both ways, collecting a salary as
if it were BigCo and getting massive chunks of equity as well.

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nostrademons
I'd say that if he's very talented and you really want to keep him, you should
give him the 25% equity. Chances are, you can't do it on your own, and you're
not going to get founder-level effort without a founder-level stake.

There was a story in Founders at Work about the Hotmail founders. The way they
worked it was that the guy with the family quit his job, and the other guy
gave him half his salary.

In particular, give up the illusion that startups are fair. You're going to
get screwed over in your startup, and someone will inevitably end up doing
more work or putting up more of the cash. The trick is to get screwed over by
the right people, so that it all works out in the end. If he really is good
enough that he'll make the difference between success and failure, give him
the 25%. If not, why are you working with him?

This all assumes that you trust him, i.e. have a good working relationship
with a decently long history. But if you don't trust him, why are you starting
a company with him?

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quicksilver1024
I'm not being paid as of yet since there is no income. We are still working on
demo products to show prospective clients.

Should he not be paid then?

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xenoterracide
not having any experience to say. I would say no. If you make him a partner he
doesn't require a wage like an employee would, since his potential benefit
would be higher, as would his risk. When the cash flows then everyone gets it.

However, you must handle that tactfully, giving him the chance to remain
employee if he wants. Of course you may have to explain the reason why an
employee would get payed where a partner making the risks wouldn't.

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quicksilver1024
I can say right now that it would be difficult for him to accept 25% equity
while giving up his salary.

The guy wants it both...

