STARTUP

A Startup is Offering Me a Co-founder Title and 10% to Be Their CTO

Is this a fair offer?

Share on
BY Quora - 09 May 2017

PHOTO CREDIT: Getty Images

How much equity should I get as CTO/co-founder to build a startup from scratch? originally appeared on Quora - the place to gain and share knowledge, empowering people to learn from others and better understand the world.

Answer by Stan Hanks, CTO of Columbia Ventures Corp, on Quora:

If you're taking a market salary, you're an employee, not a co-founder, and 10% is very generous.

In my world, the non-founder equity pool is 20% max, spread out over all the non-founder employees.

If you're not taking a market salary, that's a different discussion.

Typically, non-technical founders have this belief that they can come up with an idea and hire everything done, without having equal partners in the creation process. That's what breeds deals like you're asking about.

The reality is that if they've got the cash to pay you, you're not joining as a co-founder, no matter what they're telling you, and if you ARE in actuality a co-founder, that you and the rest of the founding team split the initial 100% equity before selling any to early investors, and you get diluted down from there.

Even at my experience level - or maybe because of my experience level - I don't have outrageous expectations for equity going into a new venture. If it's my deal, my baby, my idea, and I have two co-founders, I expect to have between 33% and 51% of the equity going in, depending on the specifics of what my partners are bringing to the table, and know that I'm going to sell about 20-30% to seed investors, and split 20% off for non-founder employees, and that at the end of the day, I'm going to wind up with 21%-32% before we start raising institutional money, and by the time we get to an exit that'll take another hit.

If on the other hand I'm brought in by the actual founding team and added to the list of co-founders, I'm expecting less than that (because I wasn't there at the outset) but I'm also expecting more cash up front (because I'm apparently essential to the success). So maybe half that.

Either way, market plus 10 points is more than fair.

This question originally appeared on Quora - the place to gain and share knowledge, empowering people to learn from others and better understand the world. You can follow Quora on Twitter, Facebook, and Google+. More questions:

• Startups and Entrepreneurship: What are the things startups have to get right?

• Startup Equity Compensation: What's the best way to ask about my equity in a startup?

• Startup Culture: What are some signs of a bad startup culture?