I joined a year old startup as employee #2. There were 3 cofounders and 2 part time employees as well, so 7 people at the peak. I got accustomed to the team, product and business during a long mutual vetting process, and signed on with a salary and a few percentage points equity. Pretty standard terms that I excitedly accepted based on where the company was:
- The CEO reported strong traction, quoting % growth, viral coefficients, etc
- The team was aggressively exploring a number of B2B models and already had several paying customers
- The team also had a direct to consumer offering that was in the market, with moderate traffic as well
- The company had an impressive group of Angels, friends & family as investors and advisors
Shortly after I joined, the company went through a radical pivot and abandoned the product entirely- B2B, consumer apps, all shuttered with orders cancelled and money returned. This is a story in itself, and not the subject of this post.
In the ensuing chaotic weeks, one cofounder left and the other developer left. The part time employees moved on or were let go. I started thinking about leaving, but a rousing pep talk and pay raise made me decide to stay.
"It's like a total company reboot," the CEO said. "We're left with the most solid possible core, and I consider you a cofounder going forward."
Equity came up as well however there were some complications with the other founders vested shares, legal hurdles to restructuring the company, etc. I stressed that I needed more equity for it to make sense for me to stay, and then in good faith agreed to stay as a cofounder with the understanding that we'd resolve equity when the dust settled. Many of you are thinking this is another post about an engineer getting screwed, maybe you're already composing the standard warnings about contracts, terms, and lawyers...
The company has reincorporated around a new product with significant traction, the equity pool is being redistributed, and the CEO and I are meeting to discuss what my new equity position should be.
I have some thoughts on what I believe is fair, but wanted the perspective of the experience in this community. Given:
- That we started over from scratch (I was stretching the term 'pivot' before)
- That we've all worked equally long hours on the new company
- That investors hold 15-25% of the company
What is a reasonable equity position to expect?
Many thanks for your thoughts & advice.
