how to proceed with negotiations with contractor/early employee

Possible Duplicate: Forming a new software startup, how do I allocate ownership fairly?

I am one of three cofounders at an early stage startup. We have been working with an outsourced developer who developed a prototype for us and has been following us closely as an advisor since then.

Recently, since the technical development of the project has hit a stall, the three of us decided it was a necessity to bring him on board and we offered him the option to join as a cofounder. He is a senior programmer who would add much credibility to the team and, as we have found out, the connections that he has are very useful. He has agreed to join us, however, we are having some difficulty agreeing on the terms of his entry.

He would like 24% of the company vested over two years with a six month cliff, and he would work around 30 hours a week or more probably on it. (The three of us are vested over 4 years with a one year cliff and are fulltime and own equal amounts of the company) He would have to work on other projects, however, since he has a lot of debt to pay (kids in college, mortgage, medical bills, etc). Basically, he wants 1%/month for the next two years and he is pretty set on that. I have contacted a few investor colleagues for advice on the matter and we seem to all agree that it would be better for him to vest over 3 years at the least. From the research I've done and the advice I've gotten so far, I believe an investor will ask him to increase his vesting time later on in order to ensure that he stays with the company. We were thinking of maybe doing a deferred salary contract/incentive bonus to get him to agree to three years and 20% once we are able to raise a seed round. Once we raise a seed round we could pay him a small salary and he could work more on this. At the moment we do not have any other cash available to offer him. How should I continue the discussion with him and is what he is asking for fair? Will this cause headaches down the road?

Co-Founder Equity Legal Salary Vesting

asked Jan 21 '13 at 09:55
11 points
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  • Did I see the same question a few days before? It seems there were already some nice answers. If that is true, I'll suggest you not to delete old question but add bounty to invite more answers, or refer to old question in new one if you have specific things unclear. My head is full and don't have good memory, correct me if wrong. – Billy Chan 10 years ago
  • Perhaps I am in a situation similar to someone else and did not notice their question. I did not, however, make another post and receive any answers like you state. – B B 10 years ago
  • That's fine. Sorry for the interruption. – Billy Chan 10 years ago
  • Actually @BillyChan you are correct. This is an almost exact copy of [this question](, which was deleted 5 hours ago (at the same time this question was created). You don't have the rep to view deleted Qs yet, but it's there. BB, please don't delete questions and re-ask them. The reason you may not have received any answers to your previous Q is because this is a duplicate of a very popular question on this site. Qs asking about equity splits usually get closed as duplicates to the linked Q. Please take a look at it. I think you will find it helpful. – Zuly Gonzalez 10 years ago
  • @BB If you have a question related to this situation that does not involve equity splits, please feel free to edit this question to revolve around those issues. We can then take a look at reopening the question. – Zuly Gonzalez 10 years ago

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Co-Founder Equity Legal Salary Vesting