Equity..How much to give?

[volcom5799]

SO as startup companies most of us dont have much money to start dishing out for employess and developers to help build the company. So what can we give away that people may be willing to work for?? Equity in the company. but the question is how much?? Are there any standard guidelines to how much equity you should give to someone who is going to help build your company? For instance i am looking for a hot shot web developer to help me out with designs and stuff. I dont have enough money to pay him a salary but also dont know if he would work for a share in the company? I dont want to sound offensive offering him too low of a % but at the same time there is now way i want to offer him equal share. So i wanted to see if anyone has any experience in this and if so how much they usually would deal out.? Not only for development but if you have ever given up shares of your company for anything worth while Lets hear about it!!!!

[davidqi]

find the person who want to join you and help you, then tell him what shape you are and what you want him to do openly, i think he will understand you and decide whether he can follow up or not. He may put some money in the company, you may share the company deponds on his capital in the company, good luck

[pboychuk]

Hmm, get a job. i find it hard to believe that you can just start paying everyone with shares of your company, people want guarantees and a startup offers very few guarantees. If you have a good idea find an investor and do it the right way.

anyways im not going to make any more assumptions as I dont know anything about your business.

[BusinessAdviser]

Give up as little as you have to to get what you want.

[volcom5799]

Hmm, get a job. i find it hard to believe that you can just start paying everyone with shares of your company, people want guarantees and a startup offers very few guarantees. If you have a good idea find an investor and do it the right way.

anyways im not going to make any more assumptions as I dont know anything about your business.

Get a job??? The startup is my job and i believe any start up deserves 150% of your time. Its almost unrealistic to have a job and try to start a company at the same time. And i am not saying i am going to be paying people with shares. I am trying to say i would give them shares in the company so they would work hard to make it succeed and it would pay of that way for them. Finding an investor is even more difficult when there is only one person running the company. So the "right way" would probably be to find more team members to take a share in the company and then go from there to find further investments. Which brings me back to my original question, How much equity do you give up without giving up too much? Does anyone have any examples from their own companies situations?

[bestill]

Start working on your business plan. Then use the internet as a resource to find angel investors. Do as much as you can and try and find someone that is willing to help you for nothing. Do not right off the bat look for some high end person to do your site. Look for an individual who has learned web design and is looking to start something up. Try and connect with someone similar to you. But if you have $0 then start learning yourself. Might be the best way until you really have things together and become approachable for an investor.

[jayer]

I was told never be a minority owner in a business. If you give a developer a 10% share in the company, and the company turns a profit of $100,000... What is to stop the 90% owner of the company from saying my new salary will be $100,000?

[akula]

Start working on your business plan. Then use the internet as a resource to find angel investors. Do as much as you can and try and find someone that is willing to help you for nothing.

dude..seriously..why would you say something so obscene and ridiculous?
...this advice is bad enough to the point of funny

[akula]

So i wanted to see if anyone has any experience in this and if so how much they usually would deal out.? Not only for development but if you have ever given up shares of your company for anything worth while Lets hear about it!!!!

this topic has been covered to death..
look up "allocating shares"

[ScottRobertson]

I was told never be a minority owner in a business. If you give a developer a 10% share in the company, and the company turns a profit of $100,000... What is to stop the 90% owner of the company from saying my new salary will be $100,000?

If it is a limited partnership, then the partnership agreement will stop this from happening.

If it is a corporation, then the 90% owner would be silly to try to pull something like this. If he/she is even thinking about future expansion through new equity, then it cannot be done. Investors will see that this was done in the past and the market value of that equity will be extremely low.

[ScottRobertson]

Get a job??? The startup is my job and i believe any start up deserves 150% of your time. Its almost unrealistic to have a job and try to start a company at the same time. And i am not saying i am going to be paying people with shares. I am trying to say i would give them shares in the company so they would work hard to make it succeed and it would pay of that way for them. Finding an investor is even more difficult when there is only one person running the company. So the "right way" would probably be to find more team members to take a share in the company and then go from there to find further investments. Which brings me back to my original question, How much equity do you give up without giving up too much? Does anyone have any examples from their own companies situations?

1. If you have no options, then wouldn't it make sense to work for operating cash, and spend the rest of time working on your start-up? I suppose it would be better to waste all of your time trying to find a "partner who will work for nearly nothing" (lol, good luck) and then end up no where.

Still think it's impossible?

2. Work full-time for a few months and save all of the money. Now you have some start-up capital.

Not possible to find investors, when only one person is running the company? I fail to see why this is true. But let's assume that it is... if you're going to spend all of your time on this business and you think it is worthwhile for partners to join you for an equity share, then you must be pretty confident in the business potential. Thus, take a bank loan out in your name, or borrow money from friends/family. Problem solved.

Finally for your original question. Based on the monetary value of the work that will be done and how important it is to your business, how much is a FAIR amount of equity to give? Make that your max offer and if it is still too low for workers then the plan is temporarily a no go. You have already determined that to be the biggest chunk that you would be willing to shell out ... the value that is brought in by these people doesn't change just because they aren't willing to work for that amount.

[Dmoore323]

Hm, interesting question. Well the fact is that the people your looking to work with need to feel passionate and confident in the idea. If there passionate and confident they'll be actively engaged in the startup, and if there engaged in that they should know money is not going to come over a span of a couple weeks. Once they agree on the job you can distribute shares. Same goes for investors, they'll only invest if they're passionate about it. No great company was ever started up with one man, it's always been a team. Look for people that are only going to lift you higher.

- And for the question of how much equity should be distributed your the only one that can answer that. You have to look at the work that was input by your employee and come to a conclusion of what fraction that is on the large scale of your business. And also how valuable you feel they are. Just look at what the Wall St. Execs. did with there government bailout money, they spent it on bonuses because they felt if they didn't those people would leave. And they viewed those people as being the brains to there operations so there stay was crucial. Although is you ask me they don't have brains.

[Usman Sheikh]

I use a equity split model that I have had a lot of success with. Check it out at Calculating Partnership Equity Splits | Journey of a Serial Entrepreneur

Msg me or find me on twitter @usmansheikh if you need further clarifications on the model.

Hope this helps.

[discountedclothing]

They were right. Start with a good business plan and wrote down everything including how much you're going to share.

[Doodyps]

I would say, if you don't have the money for a hot shot web developer, go with something less hot. If you are super strapped for cash, get a job delivering pizzas. Seriously. Or, go on Craigslist and find someone willing to do web design for free. There are usually web designers looking to build their portfolios on there...i.e.Free web design to small businesses.

They may not be hot shots, but it's a start.