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Ask HN: How much equity should I be getting?

6 points by gdiocarez ↗ HN
Hi everyone. I started with this partner who is in the US and started to work on a startup. I'm living in a 3rd world country and we talked about splitting of equity.

3 of us in my country (which build the startup from ground up) and our partner is in the US. Then a new person comes in who is in the US and started to split the equity again.

Then a new guy is getting 26% and my partner is 36% then 3 of us in our country is getting 5%.There are other people to be split, the lawyer, investors, employees.

We are not yet funded but considering that we got funded. Is the splitting of equity fair?

17 comments

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kspaans
Can you give some additional context about your roles? Right now you make it sound like you and 2 others did all of the development work but are only getting 5% equity (which is IMO too low). Has your partner in the US found clients/customers/funding?
gdiocarez
Right at the moment we have none but we are already getting a lawyer to set this in papers. Which concerns me in the long run.
andy1900
The way I understand it, four of you (one guy in the US and three guys in another country) got together and built a startup from scratch. I further assume that there were no discussions on equity split at any time.

Now when a new guy comes in, you are told for the first time that you have only 5% equity in the company.

I would suggest that before you do any further work in this startup, have a call with your US partner and speak to him about this - get everything clarified. If he does not speak to you directly about this, then you need to be very concerned.

It is very hard for HN to tell you how equity should be split, as no one here knows what each of you bring to the table. Typically, equity discussions should be carried out right before you start a partnership, so I urge you to have this discussion with him now.

gdiocarez
Basically it was 2 of us at first then hired 2 people from my side. Right now he's the one paying for all of our salary. Does that even count? I'll try to talk again about this.
loumf
If you are getting paid market salary, then you are closer to an employee than a founder. If he is paying the salary from his pocket, then he's a founder and also an investor.

Does he expect to be paid back or does he want equity from the money he's putting in? If he's not getting paid back, he's buying some of his equity.

gdiocarez
I see what you mean now. Currently he isn't being paid back but and I think your right. He's buying some of his equity.
loumf
Is anyone getting paid? Did anyone put in money?

At this point, you should just be figuring out the founder split (not saving some). You will dilute evenly when you take investment and start an employee pool.

gdiocarez
Were getting paid by my partner in the US. My partner is funding us at the moment.
loumf
Market salary? If not, what % of market?
gdiocarez
What do you mean by market salary?
loumf
The salary that is generally paid for your role in jobs you could get (with no equity)
gdiocarez
Yes, currently he gives me that. With no equity.
sharemywin
If your getting paid equity is just icing on the cake. investors probable aren't going to like all those shares floating around anyway.
muzani
A general rule I stick to is that the person who gets a salary gets less than 2 digits equity early stage. Same applies for founders who work 40 hours a week and so on.

How important is everyone to the success of the startup? If you have 5%, you should be increasing the valuation of the company by 6%. 26% share should increase valuation by 36%. 36% share increases it by 57%.

However, this assumes it's unpaid. The ones getting salary need to increase valuation by far more.

I don't know the credentials, but if the two larger portion guys play a big role in valuation, it should be fine. E.g. good degrees, previous experience with startups, investments, rare skills.

gdiocarez
Thanks for enlightening me. Currently the 2 guys do the business stuff and we do all the development.
brudgers
If you think it's fair, then it's fair. What else could "fair" mean?

If you don't think it's fair, then it isn't for the same reason. What I think isn't really part of the equation.

Good luck.