Guy is late coming founder, the company not yet incorporated.
I designed the product (several biomed multisensor devices) and taken it from concept to a mature prototype ready for manufacturing (1 year's work)
I can market and sell the product by myself in one of its possible niches. However, the product is suited to various different niches.
My idea is to tie his equity to some "deliverables", and limit his marketing efforts to those niches I won't be looking at, in such a way that his efforts will be clearly trackable. At least until he's vetted.
Note that sales is not his job description. I'm sure he can be a good evangelist, but not so sure this will translate into revenues.
I want a clear cut way out (pre-nup?), in case his PR doesn't translate into revenues.
Please share your thoughts with me. I want to make a FAIR offer to him given the above situation, so don't be limited by the tentative plan above. I want to get him to give his best, and limit risk to myself in case he doesn't deliver.
If you're both putting in sweat equity, in a year, you'll have 2 years in and he'll have 1 year. If you're not making money by then, the business is probably wrong.
I've always liked a push-me-pull-you valuation for repurchase (I'll offer you $.10 per share; if they want, other party can buy your shares for $.10; if they don't they have to sell for $.10 per share).
On the other hand, if you're paying him a market salary, then typical initial engineer stock options are .5% to 3%.
(oops -- just noticed quite old -- but answer remains the same)
As you noticed no one answered this question. This is because the answer will be very opinion based and the viewers might not think there is one solution to this problem, I agree. Equity allocation is a very sensitive topic, and since communication is key, I think its best to simply ask your co-founder what he thinks is reasonable.
I personally like the idea of giving him more equity if he shows results, but he might not. Ask him.