how much ownership or equity percentage should be given to co-founder?


1

For a cofounder who has separate full-time job, has no other investment to my startup except some time or effort on few projects/items that are needed. W/o no salary, how much of the ownership/equity percentage should be allocated to him/her as compensation?

Co-Founder Equity

asked Dec 8 '11 at 10:25
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Tom
197 points

1 Answer


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There are may variables involved. What stage is your business in (concept, development/prototype, post-development/production, etc.) Is there growth or profitability? What do you currently value the worth of the company and potential value growth year over year? Depending on your answers, there are many ways to go about it. If you are far enough along to make such projections, you could consider what it would cost to pay him outright for his services vs. the value of the company and give equity of similar value (or similar projected value). The earlier the stage of the company, the more he is helping build the company, therefore, the value of having his help without having to take money from the coffers is greater and this coincides with the higher equity at that stage. This isn't such a good model at the earliest stages where you have no real concept of actual value, but in later stages it may be. Just my 2 cents. If anyone finds flaw in my logic feel free to discuss.

answered Dec 14 '11 at 13:59
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Manuel Alarcon
188 points

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Co-Founder Equity