Is being offered 23% of a company an insult as a partner in a start up? I am responsible for building and designing the entire web app, coding the Frontend, backend, and digitizing all requirements for our proof of concept. My partner found me on LinkedIn. Its his idea, he will be running business functions, marketing, client onboarding, and he has a few real clients to do a trial run with. We’ve been working together for two months in a trial period and now we want to write up contract. How do I value myself?! ……This is my first start up !
The import links for your question:
Joel Spolsky’s guide to equity on startups
Khan Academy’s Business Life Cycle: from startup to bankruptcy
The Business Plan excerpt from Neal Stephenson’s Cryptonomicon
“Shouldn’t I get more equity because it was my idea? No. Ideas are pretty much worthless. It is not worth the arguments it would cause to pay someone in equity for an idea. If one of you had the idea but you both quit your jobs and started working at the same time, you should both get the same amount of equity. Working on the company is what causes value, not thinking up some crazy invention in the shower.”
this is shit advice. without a vision for the business, all coding would be for nothing. with few exceptions, developers are easy to replace - business vision and leadership are far harder to come by.
With few exceptions, most wantrepreneurs overvalue their own vision.
Developers are easy to replace if you can afford to pay them. Vision is pretty much worthless. Everyone has ideas. Execution matters. Leadership is valuable, but many people are pretty shit leaders, despite what they might think.
Absolutely. You want to evaluate their ability to pull this off. Are they really good at sales and marketing? Do they make good financial decisions? What qualifications do they have for being the CEO? Why are they not getting a loan to pay your salary and keeping 100% ownership? Who else are they hiring? How have they diluted the company in other areas? How good are these potential customers and the idea? What roles will be expected of you long-term? Will these stocks pay dividends? When? What other compensation is laid out for the future when the company becomes profitable? What happens if the cofounder leaves? (That’ll be covered by a good agreement along with other contingencies)
You certainly don’t want to be holding their hand through the process. Especially if you have less than 50% equity.