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I am currently apart of a very small startup. I love the idea and believe that it could be very big one day. I was hired by a guy with the idea, but the idea was still very basic, and 1 dimensional. I was paid a decent salary with no stock options yet. Throughout my time working there I quickly learned that the owner has had no technological experience whatsoever and does less than a 1/3 of the work i do. The idea that he originally came up with has been modified in so many ways, and a lot of it is MY innovation that is making the idea MUCH better.

Hes currently relying on me to do all the work for the site and has only said he will give me 2% of the company shares. Is this a good deal for me? I feel like all my innovations, even though im paid, is worth more than 2% of the company shares. Not to mention he is not funding much else but server cost and paying me. He has promised me he would hire more developers, but its been months now and nothing has gotten done. It sucks because I really love this idea and love what i have built so far. We are planning to go after funding of about $800k in a few months once the software is done, but i feel like if i got us that far i deserve more than 2% for my work/innovation even if he is paying me.

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2% for all the technical work seems a bit low. But then again - he's paying you salary. Suggest to get the 2% offer in writing. – littleadv Jan 16 at 0:14

4 Answers

up vote 4 down vote

If you're paid a competitive salary then any equity you get is a bonus.

It sounds quite simple, you are just working a job that you get paid for.

The reason people give equity is to compensate lack of salary. If the founder wants to pay you instead of giving equity, well I don't see a problem with that.

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up vote 1 down vote

If you're getting paid (especially if it's what you'd be worth in another company) you're definitely not at the founder level. This would put you in the category of early employee. For an early employee, 2% of the entire company does seem like it's within the range of reasonable, though I'd expect you'd see that vary somewhat, anywhere from 0% (that was me at one point) to maybe 10%. It kind of depends on the needs of the company, what you can provide to them, and the number of other early employees.

I suspect there's more going on here than you've described. (Or even could describe in a question posted to the Internet--it's a problem with the medium, not the question itself.)

You almost make it sound like the founder had the idea, but it was rough and vague. (It always is.) You came in, implemented it, fleshed out the details, and turned it into an excellent product. Meanwhile, the founder sat around twiddling his thumbs, watching you make the magic happen.

If that's what's happening, I'd agree that 2% equity, even if you're being paid, is low.

But I suspect that the founder has been doing a lot of other productive (but non-technical) things instead. Perhaps things like writing proposals for investors, meeting with investors, doing usability testing, designing the company's website, etc. The thing is, people have a natural tendency to underestimate the contributions of the people around them. Actually writing code is only a tiny piece of the whole process of getting a product on the shelves.

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i have been doing most of the usability testing (along with friends that we both have asked to help us out), designing the website has been mainly me, along with suggestions thrown in by him. He does do outreach to people that will help our business though – user23559 Jan 16 at 0:36
Fair enough. It's true that a lot of times, the developer has to initiate things like usability testing or actually designing/planning the thing. My point is, he's doing other productive things that probably shouldn't be discounted. Since you're getting paid a salary, it's hard to justify getting, say, 25% of the company. Equity is about rewarding those who work on the idea before there's money flowing into it. – rbwhitaker Jan 16 at 5:15
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But I can agree with what others have said here; if you really think you're worth more, sit down and have a discussion. See if they'll move you to the CTO role or something, along with more equity. – rbwhitaker Jan 16 at 5:16
@rbwhitaker +1 for the statement which most people usually ignore(including myself) -- "people have a natural tendency to underestimate the contributions of the people around them" – swapnesh Jan 16 at 11:28
up vote 1 down vote

+1 for rbwhitaker's comment. "...people have a natural tendency to underestimate the contributions of the people around them."

From your original post it does sound like you've had considerable influence on the product from a technical perspective. I would recommend reviewing your compensation and equity stake in the company. It would be strongly recommended to sit down with your employer and have this conversion prior to obtaining any funding, and to have documentation of your compensation if you do not already.

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up vote 0 down vote

This is a difficult question to answer without knowing more information. What does your employment agreement provide? Is your compensation something you re-negotiate each year? If you are not satisfied, perhaps you could sit down and discuss your compensation. Because the company most likely owns your technical contributions whether or not you receive any additional compensation, this might be a good place to start. You could point out all of your innovations and ask whether your employer believes they might be worth some additional equity. If not, then your innovations are being valued at your salary plus the 2% equity.

It is never easy to have this conversation, but the sooner you do it, the better. You will also be doing the owner a big favor if he does not discuss things like this on his own.

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