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I'm working on a startup based on my partner's idea. It's a social website.

My partner is not not a technical guy but the one with the original idea, he had previous experience with a successful startup. He manages the business part and is basically the "product owner".

I'm the main (and currently the only) developer in the project.

Originally we splitted the shares 60/40 (40 for me).

I worked on this on my free time all last year (around 20 hrs a week), at the end of last year we had an alpha version that we used to get some angel funding. I've been working full time all this year (by full time I mean 80hrs a week).

Now we are thinking on bringing a designer on board (previously we had some friend helping us with the UX experience and a freelancer doing the logo and stuff like that).

We've seen that this designer we want to bring on board is very good and he can definitely help us in the future (mobile version of the site, etc), and he's also very excited with our product/ideas and wants to join.

The idea is to bring him for shares only, but he'll work only on his free time (15hrs a week). At least until we get our initial "professional" round of financing.

Right now different investors/advisors have around 15% of the company (our 60/40 got diluted), and we were wondering how much would be a fair percentage to give the designer.

I was thinking that something like a 10% is a good number, however my partner thinks that's not enough. Whatever percentage we give him would be made available to him when we reach specific objectives (e.g. site redesign, mobile design, first 1000 active users, first round of financing).

What are your thoughts? Thanks a lot for the advice.

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Offer 10 and be willing to accept a counter-offer up to 15%. Isn't it a matter of what the company is worth? The percentage should be based on that. – JeffO Apr 26 '12 at 20:01

4 Answers

up vote 1 down vote

How long do you expect to buy his services for this percentage of the company?

You should be tying that percentage into a vesting period -- if you expect 15 hours/week for a year, then that may be 10%; if it's for two years, that may be 15%. In either case, make sure that his ownership is tied to continuing to perform -- that's usually accomplished through a vesting schedule.

Once that 1- or 2- year period ends, it's time to re-evaluate how he's compensated.

(Note: 1- and 2- year/10%-15% periods are completely arbitrary in this example. The amount that you give him depends largely on how valuable his contributions are, and that's not something that can be answered here with any certainty.)

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up vote 1 down vote

Try evaluating how much work in total would project need in order to start generating revenue/acquiring financing. You can do it in work hours or work hours* hourly wage which is harder (because it's harder determine realistic €/h rate for specific work), but can bring you to fairer share. So for example: you invested 2000 hours of work as a developer, while designer worked 200 hours on design (I know actual numbers are much higher, but for the sake of example...). So far his share of company should be 10 times smaller than yours. Again, you can accordingly translate hours worked to €.

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up vote 0 down vote

How much value, short term and long term, does bringing in a designer create?

10% of something valued at a 100 million is very different to 10% of nothing - so don't consider just talking about percentages to be sufficient.

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up vote 0 down vote

It boils down to agreeing a valuation for your company (hard) and an hourly rate for the new person (easy), then issue the shares monthly or quarterly.

This worked for me, and the company now has a good team who are paid normal salaries. Looking back, I now wish I'd tried to attract the sweat equity people earlier on!

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