What is a fair equity share for a technical co-founder (CTO)
A few years ago I started a SAAS company with 2 other guys. Lately I'm doubting quite a lot if I'm not undervalued compared to them. We all invested money in the startup and the percentage invested determined the percentage in equity.
Me: 20% (20k)
Founder B: 40% (40k)
Founder C: 40% (40k)
I am the CTO / technical guy with full stack skills:
DEVOPS (AWS, Docker, CI)
Backend (Postgres, Python and Django)
Frontend (Angular.js)
Founder B is the CEO and doing the sales and support. Founder C is the product owner and also does support.
Unfortunately we're not making revenue because of a pivot and I was not able to invest more money again. They were and because of their investments the equity is now like this:
Me: 10%
Founder B: 45%
Founder C: 45%
The company is my only stream of income and we pay ourselves €2000 net every month. They also run another company which they're making good money with and because of it they're:
1. Not financially dependent of this new startup
2. Able to invest again and again in this new startup
The problem:
- There's no equality at all with 10, 40, 40
- When they're investing my equity decreases
- They're less afraid to work with other investors in the future because they both own 45%. They can easily miss some of it. For me that's a bit different.
- It's likely that we're going to use equity in the future to get commitment from new important team members
- I'm also investing a lot. With my skills I can easily earn 6k per month as employee and 10k+ as a freelancer
- I'm very important because we're a tech startup
My thoughts and doubts:
- It's not very motivating to only have 10% with the change it will decrease more and more in the future
- For the skills, responsibility and pressure I have I think 10% is undervalued and we should not only look at the amount of money invested. When I look on Y combinator, they also have many reasons to not only look at how much is invested. See: https://www.ycombinator.com/library/5x-how-to-split-equity-among-co-founders
Concrete questions:
- Are my doubts reasonable and is it reasonable to negotiate for a higher equity percentage? What would be fair?
- Is it reasonable to have an agreement that my equity is not going any lower than 10% anymore?
- Are there any other options you guys and ladies think of?
Quite a long story, hopefully you've made it till here and can give me some advice ;-) Thanks!