What % of a startup should i offer to technical co-founder?
After paying for the building of an application with a solid business model, I realized that i need a technical co-founder going forward--The application needs some polishing and fine tuning.
I have approach a developer who is just finishing graduate school. I told him about my intention of having an arrangement whereas i can pay some cash but also have a potential developer also work for some equity. He has told me how much it would cost to do the fix the bugs and little chinks in the application. He's also indicated that he's open to other offers. How much equity should i offer at this point? Should the equity share be contingent upon performance? Finding a co-founder is really tough... I want to do the right thing.
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[ 6.5 ms ] story [ 34.5 ms ] threadWorking with him, you'll quickly learn whether or not you want him on your team. If not, it's better to make a clean break (rather than him owning 1.2% of your company, etc.) than keep equity-based ties.
If you have the cash now, work on a contracting basis. Pay him his asking rate; do not promise "future equity" in exchange for a lower rate. (Hint: that's a HUGE warning sign to good programmers to RUN... everyone wants to promise future value for coding, and few good coders are willing to do so).
After a month or two of working with him, you'll get a feel for how he operates. Is he getting the work done? On time? Of high quality? Is his communication excellent? Do you feel like you can work with him?
Those evaluations will be clear to you after a month or so, working with him on a regular basis. I'm a firm believer in having a trial period before hiring.
Moreover, you also have to consider his ability to keep contributing to the company in the long run too, especially if he is going to be a co-founder.
If you are not sure, a minority stake with a slightly discounted (or not) rate should do.
If he shows himself to be very capable for the long run too and you guys hit it off, you can always offer more later.
What does "solid business model" mean? You have stable, ongoing revenue? I would suspect you mean that you have researched your target market and believe you have a solid business model, but not much real revenue yet.
If that's the case, and you are sincerely looking for a co-founder, I would suggest 25-33% equity at a salary of 65-75% of market rate as being reasonable.
Absolutely; it's hard enough for us experienced programmers to have much confidence that a technical hire will work out, you are presumably in much worse shape. That said, don't torture him about estimates and deadlines until he's really gotten his teeth into the project, who knows what monsters might hiding in an innocent corner of the code, especially as you stress it with the diverse demands of the real world.
As for how much equity: if he really works out it should be quite a bit. You need someone you really trust to make the technical side of things work and that's harder than it appears to most non-technical people (and the less drama you experience, the better he's doing his job).
As you note, finding a technical co-founder of any quality is indeed really tough; plan for compensation based on that.