I co-founded a BtoB technology startup about 2 years ago with one partner. In the first 1.5 years we
- Quit our corporate jobs and worked (mostly) full time
- Completed the majority of technical development (outsourcing some work)
- Bootstrapped the company with about $20K each
- Entered contractual engagement with a Fortune 1000 client; we received very positive feedback but unfortunately they did not purchase service due to a combination of other strategy priorities, recession, etc.
Several months ago my co-founder dropped out for financial reasons (we’re on good terms). Around the same time I found a colleague to serve as a sales manager part time (about 5-10 hours a week on avg) for fostering customer relationships; he also is working part time with another startup that he co-founded. The understanding was that he would work on commission for my company for the first few months as we both assessed each other. We're now discussing equity (yes, we should have had an agreement much earlier). He helped get the first (small) order (and has been paid commission). There is also evidence that we will see larger orders soon.
He has played an important role and I would like him to be the VP of Sales. He helped us generate revenue, he is self-motivated and we get along well. Having said that, his role is not indispensable in that he hasn’t re-written our company strategy, he doesn't have sales experience in our market domain and I've been engaged with selling to clients as much as he has.
Currently the equity split is 64% me, 18% my co-founder and 18% for an employee pool (the pool is unused). If we consider hours invested the approximate tallies are: him (sales mgr) - 120 hours, me - 4000 hours, and my original partner - 2500 hours. He has invested no cash (but has hinted that he would be open to that). My question: are there examples of reasonable equity distribution for cases similar to this one? I know this will be a conversation between me and him but I’d like to get a sense of a reasonable initial ballpark estimate. The equity will be contingent (according to some formula) of his increased participation (more hours/week…eventually full time participation).