I have been developing some software for an online venture in return for significant equity. I am working with another founder who is developing the business. The current thinking is to value our contributions. One approach I have taken is to assess what I would charge to provide the S/W as a fixed charge project to another customer, and also to benchmark this against what other software companies may charge. This figure would then translate into startup equity. We probably would not allocate all of the equity inorder to reward for efforts in the first year.
Also I am struggling to understand how to work out the salary situation. We have talked about deferred salaries and translating this into equity, but I get the feeling this idea is not good, better to keep it seperate and treat it as a director's loan. Also I am aware of the need to not pay salaries(to directors) until income starts coming into the business, otherwise any invested money will just be eaten away.
Any thoughts on good approaches for the above would be most welcome.
Software Equity Venture Capital Entrepreneurs Investors
If you are deferring the salary and translating it into a loan plus also receive some equity in exchange for this, then you have the advantage of both:
a) Receiving equity
b) A loan that is paid back when the company is profitable for example
This is more advantageous for you, but might not be something that the founders are happy with. Ultimately there is no one standard for this type of thing, it's up to you to negotiate it with the founders of the business.
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