
Ask YC: How much equity/participation should I ask for in a spinoff? - throwaway9234
(Throwaway account for obvious reasons)<p>I work for an IT services company. They wanted to build a product similar to something I built at a previous company, and brought me in as an employee to run the effort. I have worn every hat for the last 2 years: product manager, architect, devops, recruiting, marketing, sales. We have achieved product&#x2F;market fit (though still pre-revenue) and we&#x27;re considering spinning the product off into its own company at some point in the near future, and possibly seek outside investment to grow aggressively.<p>Now is my moment of maximum leverage--without me their ability to execute on growing the product would be extremely hamstrung, if not impossible. They&#x27;ve spent &gt;$1m on my salary and that of the team over the past 2 years, at a slightly-below-market rate, and I haven&#x27;t taken the bonus I initially negotiated.<p>Lawyers I talk to all say completely different things, from 5% to 75% share, equity at a zero valuation, options (or absolutely NOT options), profit&#x2F;sale proceeds participation above a valuation cap, phantom stock, or just increased cash comp based on growth targets. It&#x27;s conceivable they might not ever spin it off, and if they do they have no conception if it will be LLC, S-corp, C-corp, etc.<p>Beyond paying the bills the owners have been minimally involved. One could argue because it&#x27;s my ideas, and my execution, that it&#x27;s just like they were an angel investor in my hypothetical company. I&#x27;ve certainly treated it as if it were my product, my company, and spending prudently. (my email signature says co-founder, since to the outside world that&#x27;s what I am.) On the other hand, on paper I am indeed an ordinary employee.<p>I have a kid and live in the Bay Area so taking a big pay cut in exchange for equity is not really an option, so my risk profile is a bit lower than your average 20-something founder.<p><i></i> What on earth should I ask for? <i></i><p>Many thanks! (also anyone know a good lawyer representing founders?)
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rajacombinator
I think ideally you would want to structure this somewhat like a seed funding
round where you and the other people who will be working on this retain
somewhere between 50-70% of the equity after spinning off and injecting new
funding. However, based on the situation and investor profile you will
probably have a hard time getting to think of you as anything more than an
employee. Be prepared to walk.

