Ask HN: How much should be my equity? | Hacker News Reader

Ask HN: How much should be my equity?

4 pointsneebz7 comments

I am joining a startup as a co-founder.

The founder has raised a small amount of funds. He is willing to pay me salary (which is less than the market-rate) plus is willing to give me 6% equity.

Is 6% equity enough (when I am being paid) ? or paid founders even given any equity?

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There are two views I would consider valid. One, you are a co-founder getting some split of the equity. Who then turns around and sells your equity to the other founder(s), this is where your salary comes from. Second, You are really employee number one. The founder(s) are giving you a nice title and a sign on bonus of 6% equity.

On the whole you give way too little information on the deal to make a real call. Though it sounds closer to the second option than the first.

I agree with option 1. But in order to calculate how much your salary is worth in equity, you'd need to estimate the worth of the company at some point in the future, your hourly rate and the risk that is involved. In his case, if there is already funding, you could take the value of the company at the time of funding as a benchmark. If they got funding from a well established angel investor or VC, you also have an idea of the odds for success (1 in 10?). What's the going rate for a full time developer? Just multiply et voila... You know how much equity you want for your first year of work.

But I already see one problem with this: your co-founders are probably working at a much lower "excepted hourly rate". I've heard people claim that the average silicon valley entrepeneur earns less in 10 years than someone working at McDonalds. In other words, you may need to be willing to accept an irrationally low amount of equity if you need a cash salary.

It seems close to the second one.

It's like a lose-lose situation, isn't it?

Like I am being paid right now (less than the market-rate, less than my current wage) and I get less equity too so if we succeed I'll get a pretty low-share from the total equation.

I assume if you succeed you'll be loaded. what is the potential cashout if you suceed? $10M? $100M? $1B? 6% of of 1B is not really drastically different than 10%. I think what matters most is the idea.

That's 6% [6% of the company stock] before dilution.

Depending on the type of stock, you can end up with squat [.0001% of the company] when the money actually comes in.

If it really was/is a cofounder position, wouldn't your equity would be comparable in % and type/preference to that of the other cofounder(s)?

6% equity + salary isn't a co-founder. You're an employee.

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