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First time posting to this Q&A so please be kind!

I and a partner are looking to build a web community. However, my partner and I are both business folks. We understand to build a successful website we need a strong technical partner.

I've already perused the Q&A's here for finding technical partners so that's really not my question. My question is, what stake is appropriate? To be very clear, I am NOT asking a would-be technical partner to do programming (understanding programming, however, is a must). I am looking for a partner who is more of a strategist and can really help inform the technological aspects and decisions of turning the idea into form. There is enough start-up money to find coders to do the actual programming work. This person would define the technical specifications and manage the programmers' work.

In light of this particular need for a technical partner, what sort of stake is fair and motivating?

Thanks in advance for any responses!

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5 Answers

up vote 2 down vote accepted

Li,

Thanks for dropping by.

A good question - one that has no definitive answer. It depends on a host of issues, whether there is a cash component to the equity offer, whether the company has outside investors, etc.

A good look (albeit anon and unverified) at what people are reporting what their compensation package is can be seen on ackwire. These numbers seem about right - anywhere from .5% to 15% for a C-Level technical person depending on company maturity & risk. Some other elements that would be involved in defining equity options can be found in this post.

Good luck.

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Thanks for those links! They'll be very useful! – Li Zhou Feb 10 '11 at 17:38
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I and a partner are looking to build a web community. [..] technical partner to do programming [..] looking for a partner who is more of a strategist [...] There is enough start-up money to find coders to do the actual programming work

This sounds worrying to me, some red flags go up... So you're thinking about 3 people with equity, all of which are managerial types? And "coders" who do the actual programming work is just something you hire with money?

What you need in the early days are people who a) get things done and b) are multi-faceted and can wear several hats at the same time. Maybe I'm reading too much between then lines, but you seem to want to build a "big company" that is small, i.e. a small company where management and strategy are job occupations in themselves. That doesn't work in early-stage startups.

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Well, if you have money - just hire the one who just love doing that. You will have to spend alot of time to find this guy.

I am not sure some steak can adequately motivate decent manager to work better if he already have market salary.

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Unfortunately we don't have enough money to hire an IT architect AND programmers. – Li Zhou Feb 10 '11 at 16:25
1  
Programmers can create a product without architects, architects cannot create a product without programmers. Perhaps you are focusing on the wrong thing. A bad implementation of a working solution (programmers without architects) has to be better than a perfect design of an unimplemented solution (an architect without programmers). You can always fix the former, the latter remains forever unimplemented until you hire programmers. – ShaneG Feb 11 '11 at 13:49
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If I were in your shoes and I had money to spend, I would hire someone and give them a competitive salary (or the best I could afford). I think this is more appealing than making them a partner. Would you rather commit to a fixed expense or give a percentage of a potentially infinite number.

As far as I'm concerned, if you plan on not being very successful, it would be best for you to give them a percentage of future revenue (b/c if there is hardly any revenue, you don't hardly have to pay anything).

On the other hand, if you plan on being very successful, you don't necessarily want to give the person the incremental share of profits going on forever.

Also, just remember a partnership is like a marriage. Are you ready to bring someone on for this business that could last potentially the rest of your life. If it doesn't work out, this person is then a stakeholder in your business.

Of course, you might be more generous and optimistic about partnerships than I am.

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It depends on if you're paying them a salary, if you are all investing cash in the business, and how you're all going to share the responsibilities.

If you're building a web community, you and your business partner may end up managing a few subordinates and sales/marketing people/services. The tech lead may be responsible for dozens of techies and several outside service providers/programmers. Hardware, hosting, etc., in other words they'll be most of the operation.

Here are some guidlines:

  • If they're investing and working for free, 33%.
  • If they're getting a competitive salary and not investing, 5%.
  • If they're working for cheap or free, and not investing, 10-20%.
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