Ask HN: How should equity+cash for contract work be structured?
- For a contractor/freelancer, how should equity as part of compensation be structured? - Grants instead of options? - Should I be buying shares at the same cost that the last angel round was at? - Is it typical to have an agreement that the startup can buy back shares within a given period?
I have been doing freelance development for the past 2 years and building my own products on the side in my free time. So far I have aggressively avoided any potential customers wanting to pay a portion of my rate in equity.
That said, I have started talks with a company that had been a competitor to a side project I created. I bootstrapped my side project and abandoned the product a year ago when it became clear a lot of marketing money would be needed to see a future. They just finished raising their 2nd angel round and want me on board to build 2.0. I still have a passion for the product and believe there is a future there.
For the sake of simplicity, lets say my normal contract rate is $100/hr and I am interested in exchanging half for equity. Again, for round numbers lets say their last angel round was done at a $1,000,000 valuation.
So at the end of 500 hours of work I would receive $25,000 in cash and $25,000 in shares (or about 4% ownership). Sound right? Any success stories when setting something like this up?