Appropriate equity for marketing / development work?
Looking for a little guidance on an equity offer for a project I'm involved in.
I was approached six months ago by a founder-developer who has written software to accomplish an idea originated by a founder-fundraiser. Software has been successfully beta tested and there is a confirmed market for it.
The offer six months ago was for me to be website lead/social/digital marketing head for the bootstrap project in return for equity.
Because of the scope of the project, I decided to assemble a team to make it happen (two developers, 1 social marketer, 1 graphic designer) with the idea that they would divide a portion of the equity I received. My team and I have been working part-time on the project for 6 months and we're now ready to launch.
Now, the founder-fundraiser has secured a small portion of our original funding estimate from a founder-investor to set up an LLC and pay office admin-level salaries to myself and founder-developer. I have been offered a fully-vested 5% equity stake now, and a full-time salary and title of CMO as the company grows.
Founders are retaining 60% equity (minus my 5%) and reserving 40% for investors.
My concern is at only 5% equity, I have no equity to offer the team I assembled and not enough funding to offer salaries. I was expecting at least a 10% equity offer, part of which I would use for equity for the team I assembled.
My question: Am I correct to expect at least 10% equity? Or, perhaps, what should I expect?
Marketing Software Equity Business Micro Startup
2 Answers
Sorry to say, but the following applies - you should expect whatever you negotiated and have in writing. Everything else is speculative / assumptions.
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I understand. Aside from not negotiating and having nothing in writing, I'm wondering about the math. If I'm speculating, should I speculate at 10%? – Alan 11 years ago
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It's impossible to gauge with this amount of info. You have to think about what your effort was worth if they actually just paid you for your time during those 6 months. Try to break down what the company is worth and do some calculations. It's surprising you would promise others equity etc. without having anything official outlined with the company. Not knowing the entire scope... a marketing website, some marketing materials. 5% immediate doesn't seem too unreasonable. – Ryan Doom 11 years ago
I feel reserving 40% for investors is too much. Not sure why they want to give so much to investors.
You can maybe coax them into reducing this amount. Tell them that if the website is really good, investors will want to jump in for a much lower amount.
