

Ask YC: What is a reasonable equity stake for a summer internship? - natrius

Here's a hypothetical situation: Let's say I'm an MBA-type and a few of my business school friends and I are starting a web startup. We have a technical guy who has been doing all of the coding so far, but we'd like to get a bit more cheap manpower so we can put out a beta by the end of the summer, so we're trying to hire one or two summer interns. We can't offer the same kind of pay the interns could get at an established company, but since they're only going to be working for us for a few months (unless we still exist when they graduate), that kind of complicates the equity calculation. What kind of equity stake do you think is reasonable for a summer intern if we pay them ~80% market value?
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SwellJoe
"Market value" for an intern isn't very high. Pay the extra three bucks an
hour so it is market value and forget this whole giving equity to interns
idea.

The ones who are willing to take internships are folks who don't have a lot of
real world experience yet, and won't produce fantastic code (and that's OK--
you're paying them pennies on the dollar and experience is part of the
equation). You'll want to recognize that there are wide-ranging levels of
coders at all ages.

I've never hired "interns", but I've hired college kids who kicked ass, but I
paid them whatever they wanted me to pay them--regular consulting rates, if on
the low end of the scale $25-50/hour usually. But I could tell they kicked ass
because I'd seen their code in Open Source projects--I'd be hesitant to hire
someone who has no projects I can look at. But those generally aren't the
folks you're going to get through internship programs (usually, though one of
the smartest developers I've ever met interned at both Google and Microsoft
while in school...I doubt either of those companies really took advantage of
the opportunity they had in this kid and he went to work for neither after
school).

Anyway, interns and contractors don't get equity. If you want another partner,
bring on another partner. Maybe even a cheap one (e.g. 1-5% stake), if it's a
kid that is working part time while going to school (if we knew where to find
just the right person, we'd be willing to do this, even though we can afford
to pay market rates for the work we need done--the right person is always
worth equity). And maybe you even pay him something. But "intern" means "here
and gone before he/she becomes really valuable to the organization". Scaling
the learning curve in a codebase of reasonable size will take an inexperienced
developer a month or more.

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epi0Bauqu
0, or something really small. If you are paying 80% market value, the
difference should be made up in the excitement of working on your exciting
startup. Say you end up selling for $20M and they end up with 1% at
acquisition. You would be rewarding them with $200K for a few months work when
you already paid them salary.

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goofygrin
0% for interns. You wouldn't give ownership to some offshore worker or a
contractor. Treat them as such.

I've done a couple coding internships (gosh, it was 10 years ago this year!)
and they paid me $10/hr. I shudder to think about the crap I wrote too.

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Tichy
Free sandwiches should do the trick.

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asdf333
So we did not offer equity stakes when we had interns working for us. We
offered them a chance to be a significant part of a small team, trying to pull
off the impossible.

As a student--especially from the top schools--I think you are more interested
in a good summer experience where you learn alot. Not lots of pay or potential
for options.

If you can convince them that they will learn alot more in a life-or-death
struggle w/ you guys and create software used by thousands of ppl the next day
rather than sitting bored in a windowless cubicle writing some code no one
will ever use....you are all set.

If they need cash, they should do other stuff. If they want to test their
limits, they should throw their lot in with you. :)

Be careful tho. Unless you get stellar interns, they are usually more work
than they are worth. By the time they ramp up, they are about to quit and go
back to school. Just think about what you did during your summer internship
and you'll see what I mean. Most ppl do jack, so don't expect them to increase
velocity too quickly. (unless you've carefully chosen some superstars)

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richesh
we are two technical co-founders who have just hired an intern to help us for
the summer. We've decided to pay him going hourly rate based on the market.
But we have also told him that based on his "impact" on the product he is
eligible for equity.

If you are going to get great contribution from them then it doesn't matter if
they are an intern. And just like any other contributors to your product they
deserve equity.

IMO, they are going to be helping your "technical guy" bring YOUR idea to
life, which it seems you are not capable of doing yourself. Doesn't that
deserve equity?

If they are smart and contribute then the possibility of equity makes them
take ownership of your product which is something an offshore team or "hacker
for hire" might not do.

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wehriam
If they were normal early stage employees I expect they'd get about a 3% stake
vesting over four years.

3 / 48 * .03 = 0.001875.

So, a 0.1875% stake in the company would be reasonable over three months. If
you make a ten million dollar exit, that's a respectable $18,750.

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wehriam
That said, I'd hire one good intern and pay him 120% of market value. One
person who feels valuable and respected will do twice the work of a team who
think they should be paid more.

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babul
0% equity as 80% salary is good enough considering for summer jobs other
places may pay 100%~120% salary (assuming market rates do not fluctuate) but
many will also pay ~<80% as it is established that interns will also gain
experience, CV value, and some mentoring too.

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attack
What is market value of interns in your area? I always have wondered this
because this seems to vary widely. Where I've lived it's been between $9 -
$15.

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byrneseyeview
Are you offering equity in lieu of cash?

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mrfish
FREE BEER

