I've been working on a project with three other people: one is a developer, one is a manager type, and one is a sales type. I'm a developer. The two developers were invited into the project by the other two. My expectation was 25% of the company equity would go to me right away. However, the other two recently offered the development group this:
5% of equity would be split among when the gross revenue is 1000/mo.
7% of equity would be split among when the gross revenue is 10000/mo.
11% of equity would be split among when the gross revenue is 100000/mo.
That leaves 23% of the company revenue split among two developers (or perhaps three if we go through on our plans to bring one more person into the project). I can understand some desire to make sure that the equity of the company does not go out the door to disinterested parties. There is also some desire (not among development) to reserve 25% of equity to bring a true entrepreneurial-type of CFO.
Does this sound like the typical deal? I'm tempted to push for 30% split among development -- maybe three rounds of 10%. Or should I demand more than that? I like these three people a lot. I don't want to destroy any relationships there, but I've been considering dropping out.
There is no such thing as "typical" deal because everyone bring different value to the party. What the structure described is basically earn-in, reaching certain revenue milestones triggers value accretion (in terms of recognising equity participation). Now your concerns are
Ultimately any type of partnership you want to be comfortable sitting across the table from the people sharing the load. If every time you feel like being screwed-over then it is a sign that something is bugging you or you have a sense of unjust (whether valid or not) compensation for your contribution. It is best to talk it out in front rather than being passive-agressive and not putting time/energy into bringing the startup to life. If you can come up with a better equitable scheme, then it shows that you have thoughtfully considered the business incentive side.