

What % of a startup should i offer to technical co-founder? - hajiss

After paying for the building of an application with a solid business model, I realized that i need a technical co-founder going forward--The application needs some polishing and fine tuning.<p>I have approach a developer who is just finishing graduate school. I told him about my intention of having an arrangement whereas i can pay some cash but also have a potential developer also work for some equity. He has told me how much it would cost to do the fix the bugs and little chinks in the application. He's also indicated that he's open to other offers.
How much equity should i offer at this point? Should the equity share be contingent upon performance? Finding a co-founder is really tough... I want to do the right thing.
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Travis
Start small. As in, hand him small assignments to do in exchange for cash.

Working with him, you'll quickly learn whether or not you want him on your
team. If not, it's better to make a clean break (rather than him owning 1.2%
of your company, etc.) than keep equity-based ties.

If you have the cash now, work on a contracting basis. Pay him his asking
rate; do not promise "future equity" in exchange for a lower rate. (Hint:
that's a HUGE warning sign to good programmers to RUN... everyone wants to
promise future value for coding, and few good coders are willing to do so).

After a month or two of working with him, you'll get a feel for how he
operates. Is he getting the work done? On time? Of high quality? Is his
communication excellent? Do you feel like you can work with him?

Those evaluations will be clear to you after a month or so, working with him
on a regular basis. I'm a firm believer in having a trial period before
hiring.

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skowmunk
Very nice advice. I do think its good to test out a person before you offer
any thing considerable big, especially when you don't have a lot of history
with him.

Moreover, you also have to consider his ability to keep contributing to the
company in the long run too, especially if he is going to be a co-founder.

If you are not sure, a minority stake with a slightly discounted (or not) rate
should do.

If he shows himself to be very capable for the long run too and you guys hit
it off, you can always offer more later.

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Travis
Agreed 100%. I was more suggesting that the first month or two be a more
trial-like basis; thus the exclusion of equity from that period.

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bobf
Are you seeking a contractor, employee, or co-founder? Be clear, both with
yourself and your prospective co-founder. You say co-founder, but it sounds
like you may want a contractor or employee (i.e. you're getting a quote from
this developer for the cost to fix bugs, etc).

What does "solid business model" mean? You have stable, ongoing revenue? I
would suspect you mean that you have researched your target market and believe
you have a solid business model, but not much real revenue yet.

If that's the case, and you are sincerely looking for a co-founder, I would
suggest 25-33% equity at a salary of 65-75% of market rate as being
reasonable.

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brianm
It sounds like you are hiring a technical employee, not a co-founder, to be
honest.

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hga
" _Should the equity share be contingent upon performance?_ "

Absolutely; it's hard enough for us experienced programmers to have much
confidence that a technical hire will work out, you are presumably in much
worse shape. That said, don't torture him about estimates and deadlines until
he's really gotten his teeth into the project, who knows what monsters might
hiding in an innocent corner of the code, especially as you stress it with the
diverse demands of the real world.

As for how much equity: if he really works out it should be quite a bit. You
need _someone_ you really trust to make the technical side of things work and
that's harder than it appears to most non-technical people (and the less drama
you experience, the better he's doing his job).

As you note, finding a technical co-founder of any quality is indeed really
tough; plan for compensation based on that.

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nolite
As a developer finishing grad school, I was approached by someone with some
business ideas, for which he generously offered me an equity in the range of
10%.. He had some real business experience, but still... he never received a
call back. Its a bit different from your situation, as you have a product
already available.. but, first offers do mean something. Just my 2 cents...

