Ask HN: How much equity should I take?
I am being invited to join an early stage startup. Actually, it's in pre-startup mode right now. They have an idea, they have a well connected angel/seed investor, they have the content and a designer. What they don't have is an engineer or a tech lead. That's where I would come in. How much equity should I ask for?
4 comments
It all depends on how much salary you draw.
W = opportunity cost value of other people's labor (i.e. if their time is worth $20/hour and they will have to put in 1,000 hours to earn their share(s), W = $20,000)
X = value of the idea with nobody to implement it (converges to 0).
Y = value of the investor's cash investment
Z = opportunity cost value of your labor (i.e. if your time is worth $50/hour and you will have to put in 1,000 hours to earn your share at future time t, Z = $50,000)
Your fair equity is ( Z - salary ) / ( W + X + Y + Z ).
Many nontech people get pretty upset when you come up with this formula and turn the crank- they think their time is worth more, their idea is worth more, and your time is worth less. (Or they didn't think, they guessed or willed it to be different).
Please try the formula approach and let us know how coming at it with a formula (where you fill in the numbers together) did for your negotiations.
W = opportunity cost value of other people's labor (i.e. if their time is worth $20/hour and they will have to put in 1,000 hours to earn their share(s), W = $20,000)
X = value of the idea with nobody to implement it (converges to 0).
Y = value of the investor's cash investment
Z = opportunity cost value of your labor (i.e. if your time is worth $50/hour and you will have to put in 1,000 hours to earn your share at future time t, Z = $50,000)
Your fair equity is ( Z - salary ) / ( W + X + Y + Z ).
Many nontech people get pretty upset when you come up with this formula and turn the crank- they think their time is worth more, their idea is worth more, and your time is worth less. (Or they didn't think, they guessed or willed it to be different).
Please try the formula approach and let us know how coming at it with a formula (where you fill in the numbers together) did for your negotiations.
This seems like a good logical way of approaching it. In my case I would be the tech lead. There are 3 other people involved. One is bringing the talent for creating content. One is going to manage the team and also UX and design. One is coming in as an adviser and seed investor.
I'd love to hear some comments in response to this as well.
Based on what you described, it sounds like you're coming in at founder level, so you should be a co-founder and have equity on par with the other founders.
Based on what you described, it sounds like you're coming in at founder level, so you should be a co-founder and have equity on par with the other founders.
http://foundrs.com - equity calculator - post back what it gives you
Very interesting and easy to use tool
I'm in the same situation. Would love to hear some feedback on this as well.