STARTUP: partnership or hire?


4

Ok I invested in my business and built the software, now got to run it!

If I hire my friend, to do all this business, and I do all things technical.

How should I pay him?

1) salary

2) with company shares 30/70%. (70% me, 30% him).

EDIT: which option is best for long term, have a partner or have an employee? he is good, really good! I know if I go with him, everything will work out ok, without him, its going to be tough.

Equity Entrepreneurs Salary Partnerships

asked Dec 17 '10 at 17:35
Blank
001
167 points

3 Answers


4

Do you consider him as vital as you are? Would you still be in business without him? If so - equity for sure.

Otherwise, salary with a small equity and three year vesting. The idea being that he's got an incitement to stay on for a longer run, with the vesting forcing him to sell the stock back to you if he leaves early. That's pretty standard anyway.

answered Dec 17 '10 at 19:57
Blank
John Sjölander
2,082 points

0

Paying him salary instead of giving away equity is always to your advantage in the long run unless you can't pay him enough to keep him on board. Paying by sales/transactions commissions may also work, depending on your product. Remember, the way you compensate him isn't necessarily tied to the extent of responsibilities he'll take (assuming he's willing to take them of course).

Of course if he reads this post and asks for equity, you'll probably have to oblige in order to keep him on board (and maybe your friendship).

answered Dec 17 '10 at 17:45
Blank
Henry The Hengineer
4,316 points

0

Do you want an employee or a co-founder?

It ultimately depends on:
1) What will motivate your friend; and
2) What will it cost you in the long run? That 30% could prove either expensive or cheap depending on how the business goes.

Just don't give him 30% all at once on the promise of him doing work; have it vest over time. Also understand that giving up equity is going to add some complexity to the arrangement. If he works for 12 months, ends up with 20% and then walks away, is that a good result for you?

answered Dec 18 '10 at 11:48
Blank
Thomas H
151 points

Your Answer

  • Bold
  • Italic
  • • Bullets
  • 1. Numbers
  • Quote
Not the answer you're looking for? Ask your own question or browse other questions in these topics:

Equity Entrepreneurs Salary Partnerships