
Ask HN: Profit Sharing vs Equity - ieatpaste
I apologize if this thread already exists (searched searchYC and didn't find anything on profit sharing)<p>What are your thoughts on investors getting a share of the profit vs getting equity? What percentage equity would equate a 10% profit share? How does this change from a short-term and long-term perspective?<p>Thanks for any input!
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jeremyw
I've been thinking about profit sharing, not in the context of investors per
se (who probably _should_ get equity), but the teams around various projects
in my nascent company. I want to put things together quickly and formalize
rewards with a barrier to ownership, investment and selling the company. The
structure is generally one that maintains or ramps rewards for involvement and
attenuates them over time (~1yr) as they leave. And the details can be
explicit and open to all.

Thoughts in this vein?

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ieatpaste
Vested equity might be a better choice for employees, since that portion of
the profit would increase cash flow and the equity provides incentive for
improving the company long-term. A profit-sharing rewards systems might be too
much like performance-based sales pay and is shown not to be good for products
in the long run.

