Start-up hiring 1st programmer. Best compensation? Hourly Rate % revenues,% ownership?

[sw4467]

We are two business guys starting an online marketplace where we take a commission from buyers and sellers. We have been working with a programmer who we want to move forward with. We like working with him and he has a lot of great input so far. He has come recommended and has pointed us to resources which have greatly helped our development process without billing us for any hours.
As we move forward, we have to decide how to compensate him. Do we contract him for solely an hourly rate? Do we give him a combination of equity and revenue streams?
This is a fairly complex multipage marketplace with many integration and user interface functions. We are starting with $10,000. The programmer has decided that he likes our idea and is willing to cut his hourly rate by 50% ($60 to $30 an hour) and take some percentage of future revenue and/or equity in the company (non voting shares).
What would you recommend in this situation? Possible problems? Possible Benefits?

[mattnelson]

Im tired so I will get straight to the point. In regards to giving some equity over programming.

Benefit - Your site flops and you have invested as much capital
Problem - You become the next ebay/craigslist and you have given away atleast 10% of your empire to save a couple of grand on website development.

To be honest, its one of those situations where you won't know if your gonna be better off until after you do it. I would tend to steer away from giving equity for web development, aslong as you are sure that you will actually succeed. If you think you might flop, then equity is a good route. Equity can also be useful if there is gonna be a lot of ongoing programming

[veikoh]

Most Silicon Valley startups had a salary package and equity options both. But those where the days when Venture Capital was in. I'm surprised how expensive your programmer is? Currently the level is something $12-$15 in hour for a good professional. Is he 3-5 times better or what?