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 !
23% is a hefty stake in any startup. But what matters more is balance: what you bring vs what you brings.
Here’s a helpful approach: start with 50/50 as if you were equal cofounders and work backwards from there based on what more he is bringing.
For example, he’s got clients, that could be valuable for sure. Is it worth giving himself 27% additional equity? Probably, depends on the clients.
This is the right framework, but there are likely many more things he COULD bring to the table: how much money is he putting in? Does he have a loan or other risk he’s taking? Is he taking a salary? What is his background and what vision does he bring? What does he bring to the table when it comes to biz dev? It’s unlikely OP could drive this business forward without his/her partner, but the opposite is very likely true. 23% to me seems like a lot.
Yes. All factors should be considered. I wouldn’t assume OP couldn’t “drive the business forward” on his own if he chose to.
The market rate for engineering skills is far greater than marketing or biz dev for similar career stages. If anything, OP has more leverage there.
However, I don’t recommend considering skills in cofounder equity negotiation - it’s unhealthy and pits cofounders against each other. Both cofounders should trust the other can carry their weight.
Sometimes proven pedigree/experience is relevant (i.e. a former exec at big company or a major accomplishment) but only if it’s very concrete.
Not really at the senior exec / founder level unless it’s a highly technical solution that requires very specific skills. We’re not comparing a BDR with a junior dev here. From the OP, it sounds like the partner is more akin to a CEO and the OP is more akin to a CTO, but I don’t have all the info on the specific situation and there is a lot of nuance. If OP joined the company post revenue, 23% would be completely out of the question.
Err, no. There’s the cofounders, the investors (may or may not be the same people, may change each round of investment), the future employee options, the vesting schedule…, the dilution agreements that happen at each investment round, what happens to vested and unvested stock at each investment round, cliff agreements, parachute agreements, and that’s just off the top of my head. 23% can mean so many different things based on the fine print.