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I've been developing a SaaS project for about 4 months now. About two weeks ago, I invited a friend to join the project to work on building relationships with vc's, drafting documentation, a little marketing, etc.

I've developed the majority of the code/concepts, but have also invested 3-4k in some backend restructuring. My co-founder also wanted to contribute and has invested around 1.5k.

He's been moderately successful at landing interviews with VC's but continues to work hard, be enthusiastic, pose intelligent ideas, etc.

We're planning on meeting with VC's next week and they will likely ask about ownership stakes.

We're not making any money off the project yet so ownership means equity.

What's a fair % of equity for his role?

Thank you in advance!

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2 Answers

up vote 1 down vote

If you don't get VC money what is your company worth? Chance of survival? Growth potential?

If you do get VC money what is your company worth? Chance of survival? Growth potential?

Those types of questions are very hard to answer without a great deal more information. All I can say as the marketing/biz dev guy is that - a fair % of equity sometimes is not proportionate to how much you bust your ass, but what you bring to the table. If the business is completely different with VC money and he brings a lot to the table a significant equity stake isn't unreasonable.

A high tide floats all boats.

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How would you measure worth pre-beta, i.e. without a user base? The project will be completely free, but will grow in 'worth' with a greater user base. If the company garners a user base while still in beta (which we think it will), then it might be indicative of a incremental userbase down the line. – user12764 Sep 22 '11 at 15:44
Again, hard to answer these types of questions without more information? Is your company another project management suite (1,000s of competitors, ease to build/clone) or something never done before with protectable IP and unique value proposition? If you have 6 months of development time in it total the company itself isn't that valuable until you have customers and prove your concept. How many web startups die without being able to sell any of their assets because their beta/pilots weren't very successful? – Chris Kluis Sep 22 '11 at 17:36
Thanks Chris - very helpful. Our project is not a project mgmt suite - or anything like it. I know of one other competitor who is pursuing something similar and I've done a fair bit of research. It's possible to clone our project in a 3-4 months of solid development. All valid questions. It seems that the projects value will be more apparent after the beta. – user12764 Sep 22 '11 at 17:55
up vote 0 down vote

First, read this thoroughly: Forming a new software startup, how do I allocate ownership fairly?

After that, read through the comments - lots of good stuff there.

In general, were I in your shoes, I would split the company 50/50 with him. 4 months is not much time (in the grand scheme of things) and he's clearly either very resourceful or has a lot of connections - either way, he sounds worth keeping happy.

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I'm of similar mind. His (the biz dev friend) thought is that he should work for the equity because the project thus far has been my "brainchild." We've resolved a 20% immediate grant plus the option of another conversation when/if our project ever gets off the ground. – user12764 Sep 23 '11 at 16:42

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