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How should we divide the equity?

I have built a startup (saas). I have done everything from scratch (technical, development, forming LLC) and now the saas app is ready to market and already has some paying customers.

I am the single founder and am looking for a co-founder. How should the equity be divided if I am looking for a co-founder who will take care of marketing (everything related to it) so that I can only focus on technical part. What are your ideas?

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    IMO, if you're able to pay them a salary from day 1, then they're an employee, and should get 1-10%. If they aren't getting a guaranteed salary (and if they are going full-time), then they are taking founder-style risk and should have a founder-size stake.

    Founder stakes doesn't need to be exactly equal, but they shouldn't be too biased. One rule of thumb is that the founder with the most equity should have no more than twice as much as the founder with the least equity. (So nothing more extreme than 66-33.) The logic here is that having a bigger gap than that leads to resentment over time, which causes people to quit and leave you hanging.

    Another way to do "unequal but feels fair" is by doing something like saying: You and I each get one share, as founders, and the work I already put in counts as one share, so we end up at 33% 66% (or whatever). This is how pirates do it. Everyone gets one share, and the captain gets one extra for his extra contribution.

    Whatever you end up choosing, two pieces of strong advice:

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      Thanks for the tips. Vesting and cliffs are really very important. I like the way pirates do it.

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    It depends on what your mentality. Do you see yourself working on this for a long time or short period of time? How important is a marketing skillset to compliment yours?

    You're ultimately investing in a life parter - not just a co-founder. Someone to share your ups and downs with and to be there no matter what.

    If you're invested in the long-term, my advice is always to split equity equally. You can take 55% to 45% if you want to maintain decision control, but overall, I'd keep it relatively equal.

    To protect yourself, you can always put them on a vesting schedule with a cliff. For example, 4 year vesting with a 1 year cliff means they earn their equity over the course of 4 years. If they leave before 1 year, then they get nothing (this includes the ability for you to fire them).

    If you're just looking for a marketer, you can give less equity and provide them with a salary. An option would be to bootstrap to a point where you have some cash coming in, pay someone part time to help, and eventually upgrade them to full-time.

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      I will surely use vesting with a cliff. Thank you for the advice.

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    I personally wouldn't give up a part in a company that the other person didn't help to build from ground up, and would say just hire them on a salary / per-task payment basis.

    That's just me, maybe that's a bad advice though.

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      I get it. But there are issues when you are low on budget and cash.

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    Depends on how you're compensating them apart from equity.

    Generally, I tend to recommend being as equal as possible. You've obviously already achieved quite a bit, but if you work together successfully for 4+ years, you'll both look back at what you'd achieved up to this point and think it was nothing..

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      Thanks for the thoughts.

  5. 1

    My advice to you would be to learn how to market. @amyhoy's 30x500 is well reviewed and might be a better long-term ROI to learn marketing yourself. https://30x500.com/academy/

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    This comment was deleted 8 years ago

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    This comment was deleted 7 years ago

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      Paying someone also depends on how much cash you have for this but I like your idea. Thanks for the help.