What is a fair equity share for four months of part-time work as an iphone app developer at an early stage startup?
I am being offered a 0.6% share in an early stage startup for being the lead iOS developer(probably the only iOS developer).The concept is good and the team consists of some smart people too.My only concern is whether 0.6% of equity (and no other compensation) is a good investment in time for four months of work.I cant seem to motivate myself to work for a non-integer share.I agree that I might get a huge payoff when we exit,but I think my share is going to be diluted even further by then.
Basically my questions are.
a) Is 0.6% of pre-series A stock a fair compensation for my efforts in making their iOS application.?
b) Is it cool to ask them to come clean about who is getting offered what in the rest of the 99.4%?
Please advise.
Software Equity Iphone Partnerships
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I should add that the company is pre-series A right now and will go for series A at the end of four months of my work. – Samyzee 13 years ago
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You need to provide more info. Does the company already have an app on other platform, Android? How many people are in the company, and what have they done to earn the other 99.4%. Based on the limited info you provided, it certainly doesn't sound like a good deal. – Dror 13 years ago
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The company does not have anything on any platform as of now.The founders of the company have founded unsuccessful startups before.Apart from the two foudners,the company has a backend engineer,a web developer,an android developer ,three UI designers.In advisory (potential investor) roles the company has some very known and smart people.The idea is great and as far I can judge it has some potential of becoming big. – Samyzee 13 years ago
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Thanks guys!...0.6% is really very low considering my share will get diluted even further after series-A.Therefore I have decided that I will give them two options. a) Pay me by my hourly rate of $40 per hour! b) Make me a co-founder! – Samyzee 13 years ago
2 Answers
Very difficult to say.
For such a short-time contract in a startup, I would not accept share-only remuneration. As you said, as a contractor you don't have enough insights in the company, you don't know the cap table, you have no idea how series-A will dilute your shares, and above all, you can't really contribute to the success of the company. So you basically are giving away your work for free, just trusting them they will be successful and will pay you in the future.
So for me, unless you're a student, or have other contracts and you can do this work on the side, it's a no-no.
You have to take a step back and determine what value you bring to the company overall.
Are you increasing the net value of the company by more, or less, than .6%?
Percentages (or fractions thereof) are meaningless. If the company is worth a dollar, then .6% is valueless. If the company is worth 10 billion dollars, then .6% is a good chunk of money.
For most "average" individual contributor developers (eg: you're not managing/building a large team), equity stakes of sub 1% are most common.
You should discuss it with them, and it is fair to ask how the shares are allocated. Don't expect to get specific answers, but they should tell you something like "The founders each have 8%, there is a 15% employee pool, 50% to investors, and the rest is currently unallocated", or something along those lines.
