I co-founded a BtoB technology startup about 2 years ago with one partner. In the first 1.5 years we
Several months ago my co-founder dropped out for financial reasons (we’re on good terms). Around the same time I found a colleague to serve as a sales manager part time (about 5-10 hours a week on avg) for fostering customer relationships; he also is working part time with another startup that he co-founded. The understanding was that he would work on commission for my company for the first few months as we both assessed each other. We're now discussing equity (yes, we should have had an agreement much earlier). He helped get the first (small) order (and has been paid commission). There is also evidence that we will see larger orders soon.
He has played an important role and I would like him to be the VP of Sales. He helped us generate revenue, he is self-motivated and we get along well. Having said that, his role is not indispensable in that he hasn’t re-written our company strategy, he doesn't have sales experience in our market domain and I've been engaged with selling to clients as much as he has.
Currently the equity split is 64% me, 18% my co-founder and 18% for an employee pool (the pool is unused). If we consider hours invested the approximate tallies are: him (sales mgr) - 120 hours, me - 4000 hours, and my original partner - 2500 hours. He has invested no cash (but has hinted that he would be open to that). My question: are there examples of reasonable equity distribution for cases similar to this one? I know this will be a conversation between me and him but I’d like to get a sense of a reasonable initial ballpark estimate. The equity will be contingent (according to some formula) of his increased participation (more hours/week…eventually full time participation).
At this stage of your company, you have a product, some revenue and now you need to expand. It sounds like you clearly need a sales guy.
It seems like you have a pool of options or share to give out, which is good. It's unclear if this is a C-corp or an LLC. For this discussion, I will assume it's a C-corp.
As for the equity split, you can consider this in a couple of ways:
One thing to consider is stepping back and figuring out your longer term plans are. This would include capital required and additional staff. That way, you can lay out your case as to the options you want to pursue.
You can also look at doing a founders agreement or something similar like mentioned in this question. A founders agreement would be a good idea if you decided to restart.
A few thoughts:
Asides from that, get input from a wide variety of people, but make a decision that you are comfortable to own.