

Ask HN: What should I expect in equity discussions? - someproduct

I'm coming into a startup as a member of the founding team. The founder (+2 others) have been at it part-time for about 2 years.<p>Not sure of my official "title," if that matters, but I'm their UI person with the value-add of product mgmt experience. My work will help the company get funding (design is the main hurdle for investors). Also potential patents for what I've been working on.<p>Just wondering what I should be aware of going into equity discussions. Percentages, voting rights, and that kind of thing. I've never been involved in equity discussion before.<p>The company has solid adoption in its local market, but little traction elsewhere. Solid technical founder, but no revenue and no funding.
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jeffmould
First, are they bringing you in as a "co-founder" or an employee? Makes a big
difference. If they are bringing you in as a "co-founder" then you should
expect a little more in terms of equity and what rights you have. If they are
bringing you in as an employee then you most likely will be subject to the
stock option plan they have.

Either way you will want to know how many shares are issued, outstanding
currently. It may be helpful to know who has what percentages, but they may
not be willing to discuss with you depending on your relationship with them.
Also knowing how much funding they are seeking and at what percentage they are
looking to give up. This way you can determine how much dilution to expect
when they do.

If they are bringing you in as a "co-founder" it's hard to say what to expect
in terms of percentage. If they are considering you an equal and you are 3rd
co-founder than you may see as high as 1/3 of the company. Most likely though
it will not be this much.

On the other hand if you are under the option plan, you will see a very small
percentage compared to the overall outstanding. For example, they may have set
aside 10% of the outstanding for the stock option plan to cover all employees.
You will see a small sliver (under 1%) of that.

Voting rights, well unless you are a co-founder and are on the board your
"voting rights" will be minimal at best.

You will want to know what the vesting period is. That is how long before you
actually own all the stock. You will want to know what the strike price is
(that is the price at which you will have to pay for the stock/options).

Personally, unless I truly believe the company is going to take off and see a
acquisition down the road, I don't look to equity to get rich. Your chances of
making millions on stock/options in a startup are minimal at best, especially
in the case of options. Not to discourage you, but that is just a fact of the
matter.

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someproduct
"Member of the founding team" is the verbiage that's been bandied about, but
not entirely certain what that means yet.

Your response has been very helpful. Thank you.

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maxawaytoolong
Expect to get 1% of the existing options if you're lucky.

