Forming a new software startup, how do I allocate ownership fairly?
We have a team made up of four co-founders. Our equity split is:
Co-founder #1 40%
Co-founder #2 5%
Co-founder #3 15%
Co-founder #4 20%
Employee Equity pool 20%
Co-founder #4 is the only technical member of our team, and he could really use some help from a designer. We are boot strapping and pretty much cash poor, so we are looking at creative ways to compensate a designer. We do have a designer that is very interested and wants to be involved. The following are some ideas I have had for compensation, but before I approach him with these offers, I want to make sure they are reasonable and fair. My goal is to build a team, and I want him to be happy. Please advise on the options below.
5% equity. With this option he would donate his time (part time, 10 hrs a week) to the business. He would be given a salary at the time of funding, or when we become profitable, and also come on as a full time level one employee.
3% equity. With this option we would offer him a deferred compensation, and a full time position when funded. He would be paid "back pay" for the hours (also part time) he put in during construction at the time of funding.
1% equity. With this option we would pay him cash as we go at say 50% of his normal hourly rate. He would have the option to keep his 1% equity and not join the company, or join the company at 2%.
Are these offers in the realm of feasibility, or am I way off base? Any suggestions or input would be greatly appreciated. Thank you very much!