Equity for cofounder
3 comments
I would NEVER join a company, esp. as a co-founder if my vesting was over 10 years for 10%. Nope.
and as @sharemywin states, at 4) he is fully diluted - and would happen way faster than his vest schedule. Especially. given its just the two of you and you still need to build a company, hire people, raise money....
I think the whole proposal is bad. What I would do is give him more - and then when you bring on other entities (investment/employees) the future equity come from your both positions.
and as @sharemywin states, at 4) he is fully diluted - and would happen way faster than his vest schedule. Especially. given its just the two of you and you still need to build a company, hire people, raise money....
I think the whole proposal is bad. What I would do is give him more - and then when you bring on other entities (investment/employees) the future equity come from your both positions.
Hi samstave
Sounds like the vesting schedule might be problematic. Would 10% over 4 years still be bad, out of curiosity, from your perspective?
Options vesting over 4 years is pretty much the only vesting I have experienced in my 23 year career.
25% vested after year one, then the remainder vesting each month there-after.
This may help:
http://www.businessinsider.com/everything-you-need-to-know-a...
As should this:
http://www.businessinsider.com/everything-you-need-to-know-a...
25% vested after year one, then the remainder vesting each month there-after.
This may help:
http://www.businessinsider.com/everything-you-need-to-know-a...
As should this:
http://www.businessinsider.com/everything-you-need-to-know-a...
1,2) Probably yes, depending on your situation.
3) Probably not.
4) Ownership doesn't work that way. When you do 3 funding rounds at 20% each, you're left with 51.2% (1 - .8.8.8) not 40%. The co-founders 10% would be diluted to 5.12%.
The accelerator you went through would be the best source of advice for 1 and 2, since they know your situation.
3) Probably not.
4) Ownership doesn't work that way. When you do 3 funding rounds at 20% each, you're left with 51.2% (1 - .8.8.8) not 40%. The co-founders 10% would be diluted to 5.12%.
The accelerator you went through would be the best source of advice for 1 and 2, since they know your situation.
On point 4 his/her 10% would get diluted.
I hired a few friends (as contractors) to help during the course of the program and by demo day, the company has become quite attractive to investors.
I am thinking of bringing on one of my contractors (he is also a friend for about a decade) as a co-founder. I've been advised to give up to 10% with below market salary (vested with cliff), or 5% with market salary. I can't afford paying market so my questions are
1) Is 10% good for a cofounder? If not, what would experienced entrepreneurs suggest?
2) Would a ramp vest over 4 years be recommended ( Year 1 - 1% (with cliff), Year 2 - 3%, Year 3 - 6%, Year 4 - 10%)?
3) Would it be beneficial to change the vesting schedule to 7-10 years (instead of 4) and vest ~1% a year (with a 1 year cliff) ?
4) Is 10% too generous over the lifetime of a startup? (Financing rounds (3 rounds at 20% each), 7% for accelerator, 20% for employee pool) This leaves a total of 13% (in an average case) between founders - so really should be 6.5% each between the two of us.
Thank you for answering