

Ask HN: I've been offered some equity for work as Employee #1 - ccitizen

Hi HN,<p>This is a throwaway account as I'm pretty sure the people who know me knows my user account here.<p>I'm kinda in a weird situation right now. I'm actually a freelance Rails developer who have been taking on projects from startups.<p>I've recently been approached by a local startup to help with their Rails development and I have been heading down to their office to do some pro-bono work for them (I don't often do this but I found myself having some kind of rapport with the founders).<p>The startup is still in its pre-seed stage and I'm currently advising them on the technical aspect of their startup.<p>They have two founders, 1 a Business/CEO guy who has 17 years of experience and a technical guy who has no working experience.<p>During my short time working with them, I found myself teaching/mentoring the technical guy most of the time.<p>The guys recently approached me to offer me to work with them.<p>I would be working:<p>4 days a week and I can take 1 day off to work remotely from now till the start of Jan.<p>From Jan to Mar, I'll be working about 14 hours+ a week as I have an existing commitment with another project.<p>In return, I'll be given 10% of the equity at the end of the 4th month, USD$933 (converted from my local currency) for working in December and USD$465/month from Jan - Mar.<p>The project I'm working on from Jan - Mar would give me about USD$3.1k/month. Normally, I'd earn on average of USD$27/hour for my freelance work.<p>I obviously earn much much less than I normally would if I were to take on freelance projects.<p>I kinda like the team but I feel that the amount of compensation doesn't make sense. I have some faith though that the CEO guy would be able to secure some form of funding and probably maybe even attract angels.<p>Does it still make sense to take the risk of equity over cash compensation or how should I renegotiate?
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yourapostasy
Looking over the 7 comments so far on this, I suggest you trust your instincts
that this isn't a tremendously well-conceived business. Find someone else
whose Rails skills you find are roughly comparable to yours, and say you are
too booked to commit to sling the code for them, but you would be happy to
serve in a technical advisory / oversight capacity as a board member, and
here's this other Rails coder who should be able to serve your needs almost as
well. Typical board member time commitment is no more than 16 hours a month
for a director who is conscientious, with no chair commitments on a board, but
one who preps for the board meetings, is available for ad-hoc and committee
meetings, etc. Typical compensation is entirely equity, around 2% at the pre-
seed stage for each director. Read up on what board of directors do in a
startup if you take this advice and use it, before you approach them; don't go
overboard, an evening spent Googling around is sufficient at your stage with
these guys, you just need to get a feel for the boundary between guidance /
advice and operations.

This delivers several objectives:

* Puts out the message: your professional time is outbidding their bid in the market. * Retain the relationship for a more manageable time commitment. * Allows them to get strategic-level technical advice from you "for free" (for now), and implement in the trenches as they see fit. * Gives them a starting point for another in the trenches implementer.

Expertise matters _a lot_. Execution matters more.

It can cost very little to offer general board-level guidance (making sure
they are asking the right questions) using your expertise if like in your
situation you are favorably disposed to the parties. It should cost very dear
for you to use your expertise to execute.

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kd1221
I have to second gallerytungsten's comment.

I've been approached a dozen times by business people offering me equity for
my development time. I committed to and completed three projects and nothing
ever came of them. Thankfully it only amounted to ~1000 hours among the three
projects, but it's still time I wasn't paid for.

A technical co-founder with no work experience doesn't sound like much of a
"technical" co-founder. Has he worked on any sort of open source projects,
done research at a university, or anything that could be considered
experience? If not, then it's not a good sign.

If you can afford to spare the time, then by all means take the opportunity,
but I'd ask for 33% and wouldn't settle for less than 25%. Just state that you
feel you'd be playing an important role in the product's creation and expect a
more equitable share. You're allowed to put any price you want on your time.
If they're confident the venture will succeed, then they should relinquish
some of their share, otherwise they're being a bit greedy.

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gallerytungsten
It sounds like you'd be more or less a co-founder. Why are you only getting
10% and not 1/3? Do you really think their "idea" is worth that much? Ask for
1/3 and align your interests with the other co-founders if you really want to
do this.

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dylangs1030
This generally depends on your personal needs.

1\. Do you have another job? 2\. Can you afford to work for the amount they
are willing to pay you? 3\. A general rule of thumb is that you _always_
renegotiate. Once you reach salary negotiation you're pretty much going to be
hired, and the worst they can do is say no.

You need to figure out if you can work for equity over cash. How viable is the
company?

~~~
ccitizen
I'm a freelance developer.

The amount of money that they offered will not last me more than a week.

The company is in the space of business intelligence and their customers would
mostly be corporate/startup owners.

I'm not crazy over the idea, but it does sound viable but then again there's
so many competitors in this field.

The only saving grace is that I find that the CEO guy with his previous
experience managing a medium-sized company may be able to use his connections
to get customers.

And the startup environment where I am in (Singapore) may be advantageous to
him where angels and government grant givers take previous working experience
before giving out cash.

~~~
TWAndrews
BI is a pretty crowded space. Even with the connections of the CEO, he's going
to be competing against established companies with significant teams of
developers ranging from smallish, but quickly growing (e.g. Tableau) to
monstrous (e.g. Microsoft).

I'd be very reluctant to take almost nothing but equity in a BI company unless
the CEO can make a very clear and convincing case for the product over the
legions of competitors you'll face.

~~~
ccitizen
I am not totally convinced that he knows the space well myself.

I find myself trying to justify sticking with them, maybe negotiate a lower
working time/commitment for the same pay (provided that they cannot afford to
increase the pay) in exchange of losing this friendship and potential network.

Although I still think I'd be shortchanged.

Another worrying trend I feel is that while I'm probably 'employee #1', I find
myself doing more architecture/design work than the technical co-founder as he
is a relatively new programmer.

What would be a good way to ensure that I do not burn bridges while
negotiating and/or rejecting?

~~~
TWAndrews
I'd just tell them that your current financial situation doesn't enable you to
work for just equity. And if you feel like you're doing more of the technical
work than the technical co-founder, it's probably not a good situation
overall.

