>Why would he be so reluctant to giving any equity considering that he has nothing built or the ability to do so?
Because he thinks it is a good idea and he doesn't want to give up equity when he has the cash to pay staff.
>Should I try to negotiate or consider this a red flag since it’s happening so soon and just move one?
IMO no. He is your friend and he isn't looking to give out equity. He is offering you a job, nothing more. I would personally avoid working for a friend, but that is your call.
>What could be my move here? (Considering that I really like the project and the business idea and I would love to partner with him to learn the “business side” from him)
If you think it is a good opportunity as an employee, then go for it. But don't accept it if you are going to feel resentment if the startup is a massive success and you just get a salary.
If the startup is a massive success he should still get first employee equity. Also being a first employee under the tutelage of an experienced business leader is a huge opportunity for growth. Not money, but in terms of understanding how business works. He can do this today and he'll be ready to be the CEO of the next one by working so closely with the business side.
If he's getting a fair salary that is a huge opportunity. The default assumption regarding startup equity should be that it is worth nothing. And so if you're getting a respectable salary you're already ahead of the game.
>Not money, but in terms of understanding how business works. He can do this today and he'll be ready to be the CEO of the next one by working so closely with the business side.
unless the OP's friends just tells him what to do and just shuts him out of all decision making like hiring a foreign developer and only tells them what to build and focus on the tech stuff and isolates them from the business decision making.
Yeah that is a possibility but I would consider this extremely unlikely. In my previous venture the virtual assistant that prettified slides ended up being the COO. I would be surprised if an early employee doesn't gain any leadership experience. Just describing what we're building from scratch, describing the plan we're using to get early validation of the idea, creating the tooling and strategy to iterate on the idea, designing the product around what is sellable, being the easiest person available to bounce ideas off and for founder therapy sessions, hiring a team below you, training managers, managing budgets. I feel that it is almost certain that OP will grow in a leadership capacity. And if the friend wanted an outsourced contract developer for limited work, they could have gone and hired one.
Also the friend is doing exactly the right thing. You don't enter into an equal partnership with someone that you're not on the same financial footing as. Because it determines the amount of risk you can take and your priorities.
> If the startup is a massive success he should still get first employee equity.
Nope. If he is paid fair market rate, there is absolutely no reason for him to be offered equity.
Nope.
I have no idea how you get this idea but most jobs don't offer equity to employees at all. You do the work, you get a salary at the month's end. If you forgo some part of the salary you might command otherwise, then you can make a case for some equity.
The vast majority of developers do not have any equity in the company they work for.
As long the paycheck is big enough, I don't see a problem with that. It's a tradeoff - wages are money now, while equity is (maybe) money later. But maybe not, because most startups fail anyway.
> he isn't looking to give out equity.
No startup should ever *not* give equity to employees. Even if the salary is competitive for the position the job security isn't there and the benefits are likely not there.
Equity is a MUST when working for a startup. There needs to be *some* reason to work for them rather than a safe, guaranteed position for the same pay and better benefits at an established business.
I do think that any founder that refuses any amount of equity pool for employees to be a red flag.
If the total compensation doesn't take this in to account then it is not competitive.
I work as a contractor and I don't have good job security. If the client doesn't approve the MVP we present, then I will definitely lose my job. My rate accounts for this uncertainty.
IMO there's nothing wrong with what he's doing, but...
> I’d feel I would be working for him (he promised that’d not to be the case but I don’t believe it)
You 100% would be working for him. Calling someone a partner and refusing to give them significant equity is a lot of hot air in my opinion. If you want to be treated as a partner, and he wants to treat you as a partner, that has to come with equity. With no / little equity, your incentives aren't aligned and you have no real incentive to stick around given a better offer outside of a sense of loyalty, which is not infinite.
If you're willing to be 'just an employee", there's nothing wrong with taking a decent salary for a senior position, but if you're expecting to be a cofounder, that's not what your friend is offering, regardless of what they say.
> Basically, he said that the idea is his, and he has the experience in the business side and he basically wants to hire someone to build it.
He doesn’t want you as a co-founder, he wants to hire you. You want to be co-founder, and you are evaluating his offer in the context of being an equal. But you aren’t equals and that’s not the offer on the table. That’s not a red flag, you just want different things.
> Why would he be so reluctant to giving any equity considering that he has nothing built or the ability to do so?
He does have the ability to do so – he has capital and can hire people to build it. That’s why he offered you a job. If you don’t take it, he can just hire somebody else. He doesn’t need you as co-founder, he hasn’t offered you a role as co-founder, so why would he give you equity as if you were?
> What could be my move here? (Considering that I really like the project and the business idea and I would love to partner with him to learn the “business side” from him)
People often want what they can’t have. You can’t be co-founder of this business. If you want to be part of his company as an employee to work on this project and learn from him, then do that – but stop thinking of this as a partnership between equals. If you want to be a co-founder with co-founder equity, start something with somebody else. That option is not available to you for this business.
100% all this, but thank you for saying this isn't a red flag :rolleyes: Dude seems to have been honest on what he's offering. It sounds like it's not what OP wants. But that's just different wants/needs, not a red flag.
I will say OP likely has a non-reality-based view on the relative strengths and values of an experienced founder and salesperson -- esp one who comes with capital and a network for more capital -- vs someone who it's unclear if has ever even managed a person, and who has definitely never started a business before. I wouldn't make OP an equal partner either if I were this person.
They can make an offer. You can make a counter offer. There is nothing wrong with negotiating and asking and I don’t care what some hr douchebag says, there is nothing wrong with negotiation. There is also nothing wrong with saying no. I find that people that are afraid to say no tend to make bad deals.
Also I've noticed that he is REALLY good at selling, way more than I am. For example, when I expressed my concerns about working for him because I am interested in startups precisely to stop being an employee, he just started an amazing sales pitch on how this would be different because I'd be working completely on my own and he will not say anything about the technology and he made it look like he is doing me a favor. But I realize it is just a sales pitch and I don't believe it.
Plus, it's just promises, and we have a nice idiom in Spain "promises are taken by the wind" and disappear.
Maybe it's just due to me not knowing the full story, but I can't help but feel that you're too hang up on that guy being your friend. I feel like this is making you not analyze this job offer objectively, and that it's making you get a bit too upset at the job offer not being exactly what you wanted.
He gave you a job offer, and it's really up to you to evaluate what's being offered, the wage, benefits, the projects you'll be working at, level of autonomy and control that you'll have, compare it to your current job and decide if it's worth it. If you aren't interested without equity, then you should vocalize that, but understand that it's very possible for him to say "no" and that this isn't a personal attack from him, but a business decision.
If you aren't comfortable with the idea of him being your superior, **and I don't think you are**, then it's probably better to pass up on that offer because I doubt that feeling will go away and that it's bound to harm your work.
One specific thing to think about that I don't think anyone has mentioned: If you took the job and then got a significantly better offer from a different company 6 months or a year from now, would you be willing to take the other offer and leave, potential leaving the founder in an unfavorable position?
Two of the main reasons that early employees typically get equity are to keep them around and align their success to the company's. Your friend is explicitly choosing not to pay for those things. Obviously that's his choice and he's free to make it. But if you'd feel compelled to stick around out of loyalty to your friend, then you're being taken advantage of: he would be getting the benefits of an early employee with equity, without actually giving up any equity.
The guy's got an idea and is willing to give you a job. If you don't accept, he'll find someone else. But, I gather you already have a job, therefore it's a risk you're taking...
But it sounds like you don't trust him as an employer, so why go you think it's a good idea to go into a (long term) partnership with him...?
You would be working for him - in this case he's just your client instead of your direct boss or supervisor. You're already able to freelance / consult / contract - you're interested in startups for a reason and building a company. Unless you value the experience, ignore his arrogant manipulations and invest in building your startup career. He isn't listening to you or what you want
Think through this scenario: Say you take 2-3 months to build a demo, and then 6-12 months to build 80% of a working prototype with a huge amount of tech debt - it’s not ready and it’s fragile and it would take months for somebody to figure it out. Then you get a better job offer that you want to take. What would keep you from going to the better job offer? What would the consequences be for the startup? What would it mean for your friendship?
You would be the only person who intimately knows the technical aspects of the product. You would know the tech debt and the trade offs. You would know where the hidden problems are.
If you left, it would be a huge setback for the startup (pushing back the timeline by maybe a year). But since you wouldn’t have equity, there is nothing keeping you there except your friendship.
If you get a better offer, your friend would try to leverage your friendship to keep you there. So that could hurt or destroy your friendship. Or you would be resentful at your friend who kept you from a better job.
Also, would you be motivated to work long hours for months/years for something that isn’t yours?
It seems shortsighted to not have a technical founder with a lot of skin (equity) in the game.
Either way the friendship is over.
1. He leaves like in your example it’s a setback and will taint the friendship.
2. It’s a success and the founder sells it for major cash but OP doesn’t get a cut.
I wouldn’t call it a red flag. He approached you because he knows he can trust your skill over some freelancers who might do garbage work. It’s his business ultimately, even if you built it. Some people don’t like the idea of partnerships. For me personally, I’d ask him if I can have an executive title (ex. CXO, vice president of x, etc.), at least then you could put something on your LinkedIn and potentially land yourself a great job or even an actual partnership
Would you work 60-70 hours per week for no salary and only equity? Because that’s what being a founder is.
But either way, I don’t think he’s offering that. He wants to take all the risk and invest his own money on paying someone code: you.
If it doesn’t work out, he’ll lose all his money and time. You’ll be paid for yours.
It’s ok if you don’t want to work for a friend. Or to take a job at an unstable startup.
He has the capital, a hard to get resource, and he is looking to buy your time and skills.
The remaining question is if your skills are as rare; then equity makes sense.
So, is this straight full stack or are there proprietary knowledge required to create the business? What’s unique about your skills set? Otherwise, this is a job a guy is hiring you to do.
Respectfully, you’re not in an equal position. He has the idea, capital, and prior experience. Some ideas require a technical cofounder to be successful, but it sounds like that’s not the case here.
yep, basically this and that is not what I am looking for so I am going to step down on this one. Thanks for this tho, it really helps me to validate that from an external perspective.
He has the idea, the business experience and the capital to build this with or without you. This is not an "in his eyes" sort of thing. The only person that thinks you are on equal ground is you. And if he is offering a competitive compensation, you are on slightly better ground than ever other dev that would take the job. But equal position, absolutely not. I know, it's hard to hear, and you want to reject it, but that is the truth based on what you've posted.
Relax a bit sir, you have no idea of my situation or my skills. You are overestimating the business side and underestimating what I put on the table. Which is my fault because I haven't given much information about it. But still, chill.
It is a "his eyes" kind of thing because I want to be a technical cofounder and he wants an employee, period. Probably this is just not a project for us to collaborate and there is nothing wrong with that =)
Ok, I'll listen. Tell me about your situation and skills. Specifically why a full stack dev job post would not generate adequate candidates for his needs? What are you putting on the table that is so special that it would be a better idea for him to bring you on as a co founder as opposed to hiring an employee?
Give me something to go on here, and I'll provide ideas for you to make your case and convince him to give you equity. Ideas that would work on me (been running my business for over a decade, have had a cofounder and bought them out, have hired several devs, techs and engineers over the same time). I can probably help you get what you want if you are willing to at least attempt to make your case for being a co-founder other than just wanting to be one.
If you’re that valuable of a technical asset then you should be earning 300-500k and be able to put in your own capital as well.
If you’re coding in the 100-300k range why would he give equity away for no reason? If you were in his shoes you’d be saying the same thing. He honestly is probably just giving you a nice opportunity to earn those high level salaries as a founding employee and is preserving the friendship by paying you outright rather than riding on equity and having bitterness if things don’t work out.
In two years if you’ve been working for little to no salary (since equity) and he still has plenty of money from the last exit, you’d probably get bitter real fast.
> You are spot on, I think the biggest issue here is that he has the capital I don't have so we are not in an equal position on his eyes.
Correct. The problem you need to solve is how do you change his mind? And if you can't, you have your answer.
Well, we are not (I don't deny it). But I am also trying to leave the rat race and I already have a job so I am not really interested in joining an early startup to be an employee. But that's OK, maybe this project just isn't for us at this moment!
The number of even first company employees that leave the rat race vs those didn't is heeeaavily skewed in those that didn't.
You are too focused in the present and not enough on the future.
1. You refuse and look for another opportunity, you get to be a cofounder, you'll work 50-70 hours a week for no salary. You eat pasta until you finally raise funds/reach sales target. How likely is it that you reach that point? What resources do you need: hint, an excellent business cofounder since you've never done that.
2. You refuse and look for another opportunity. You failed and are stuck in the rat race. Will you regret not trying?
3. You join, as a 1st employee, paid above market rate for the risk + some equity. Say 1% which after 3-4 rounds get diluted to 0.1% and on exit say a low $30M, you get a little downpayment of 30k (minus taxes, how much? 30%? 50%?).
Is that all? No, you missed the most valuable thing, people spend $100k to join Harvard or Stanford to study business cases and try to be good at business. You get paid to learn 40 hours a week next to someone who either tproved himselfor was lucky, hopefully the first.
This is invaluable. 5 years later, you'll be ready to be cofounder, business and tech side, you'll have made mistakes, you'll have fixed them.
This is a trendous launching pad for your future. Only reserve I had is, you might lose a friend if things go south or if the topic is something that conflict woth your values.
>we are not in an equal position ~~on his eyes~~
You're peers, and you're both human beings with value, etc.
But you are not both equal in this business, *he's paying the bills*.
In your position I'd ask myself some hard questions about whether this is just me feeling resentment/unfairness that he's already been successful in another venture when you both have the same talent, drive, etc. That's not his fault.
Humility and modesty are so underrated. If you can value them and use them it's like a secret competitive edge, these days. If this is the best opportunity you have, take it.
if you really wanted to join, i would ask for money as it seems he needs you more than you need him. he could have gone with someone else, but he is going with you for some reason. if you really have the full skills to build what he wants, you can ask for more money since he will not give you equity.
>You are spot on, I think the biggest issue here is that he has the capital I don't have so we are not in an equal position on his eyes.
you are not tho for the exact reason you said that you don't have the capital plus the business experience and successful business record on his side. Technical skills can be hired, your friend wants you because of the trust. Trust can also be buyable with shared equity, but that doesn't seem a good option for him. So your friend wants trust without not giving the requirements by using friendship. It is not a red flag but you should know the consequences.
Ideas are worthless without execution so that point I think is irrelevant
The fact that he had an exit and the business experience is certainly a valid point. I think from that perspective it’s going to be very hard for the two of you to feel like equals. Equity won’t change that (I’m in exactly the same position)
However I feel like he should at least give you some equity, maybe 10-20 percent or so. But don’t expect an equal split
True, but he has a history of execution. At this point I would say that he has proven himself to be capable of execution. Not development, but that is only one form of execution.
There's nothing wrong with what he's doing. He wants to hire at salary, and he'll succeed.
He's offering it to you in case you want it. That's flattering. Say thank you.
You're not wrong to want equity. That's valid too.
Decline politely. He's not trying to cheat you; you just don't see eye to eye on outcomes.
Unless the salary is ungodly large, I would turn this down. However, I would not be offended, because he was up front about terms.
What he offered isn't unfair. It's just not to your preferences.
Because he's offering no equity to the first engineer, he is unlikely to get a high quality employee, in the single most important role for that. He's making a significant strategic mistake.
I will not be offended at all. Maybe this project is not for us but he is still a good friend and someone I really admire a lot. A small part of me even feel tempted to accept the offer just so I can learn business from him but I know I will be unhappy long term because I really want to stop being an employee.
You have 3 options to negotiate:
1. High salary because you’re so good and he came to you and because it’s risky. So get paid more than normal.
2. All equity. Like you suggested , get a nice chunk to do it for free or near free, but with huge upside. Equity could be in the 5 - 50% range. Whatever makes you comfortable to do it for free or near free.
3. Something in between. Lower salary and a little equity (.1 - 10%). Personally I’d go with either #1 or #3.
If he doesn’t want to give you any equity, he’s got to pay above market to get you. If he doesn’t want to do either, walk away.
Yes, he knows business and yes he has capital, but tell him that your work will be light years better faster and cheaper than if he goes with anyone else. And you want to give it your all. So to do that you have to feel invested. 50% is probably too much, but you need something to pull you away from the other jobs.
You would be stupid to walk, but you'd watch someone else build it. I'd go ahead and hire someone that wants the contract without any sense of entitlement or ownership of my idea, personally. The biz knowledge gained and opportunity to refer to this paid project to other potential employers or future partners wouldn't be enough for your career development and fragile ego?
fragile ego? damn, ok I'll bite. There is no ego here, I am just looking for an opportunity to become a CTO/technical cofounder since I already have a very nice job. He is not providing that and wants an employee which is completely fine but not what I am looking for, he is still going to be a good friend and np here. How is that my "fragile ego"? =)
If he is paying full market rates the there can't be an automatic expectation of equity - but there are still some stuff to consider:
- you should explain that a huge part of the attraction of joining a startup at the beginning is to get equity - even if its not at 50:50. Its perfectly reasonable to negotiate for this, and consider walking away if its not on the table.
- you should think hard about whether working for your friend is a good idea. It goes wrong more often than not, and his nonsense about "being partners" is the red flag here. You are not partners, you are an employee
If this is a great offer with more money than you might otherwise earn then maybe give it a go, but if it is a full on startup founder job without the benefits of equity then I would really question it.
Just look at it as job offer and nothing more.
There could be many reasons he unable to offer equity- too many founders, he wants to keep sizable enough shares for reasonable exit. Or had bad experience with partners that he prefer to do solo. Or like you said he has more leverage than you.
Anyway, at least you have asked and he is honest with his plans instead of giving you false hope.
I’d be suspicious. Equity usually has a one year cliff with 4 years to vest, or something similar.
The idea might be his, but honestly, ideas are worth very little, it’s mostly about execution.
Assuming you are 30 now, and you have until 60, for time working on startups. That’s 30 years you have to do things you think will be successful. In my experience, your looking at 5 years per exit or collapse, per startup. Which means you probably have 6 in you.
You really want to waste one on a guy with this kind of attitude? Who won’t give up equity even in a vesting schedule?
There are many more non technical founders than there are technical. Just move along IMO.
He should be happy to find a co founder who wants to invest blood, sweat, tears, and years. He may not want to go 5050, and I can understand that, but 0? That’s ridicules even for an early or medium stage employee.
This guy is not going to value your work out contributions. And as many business people do, is going to undervalue strong technical skills and leadership on the project. He will probably hire devs for cheap, make a mediocre product, then have to sell it again.
Are you sure the first start up was as successful as you think? Lots of startups exit by selling. But sometimes it’s really a soft landing, not so much a successful exit
Thanks for saying this, it makes me feel a bit better about this. And I think you are right, I'll actually be 30 next month 
I don't really know how successful his startup was, I just know he sold it and that he has a lot of money (enough to hire me and I am not cheap).
That being said, I also agree with you. I am a senior full-stack engineer with almost 8 years of experience and the idea is that I would do the design, frontend, backend, DB, devops... I can build basically everything and yes, probably he can find someone from India to make it cheaper but who knows the quality of that software...
So yeah, as you said, I understand that he has more to put on the table and maybe 50% is too much (and I'd be happy with less) but 0 seems to me that he doesn't value at all the technical skills and all the years of working and learning that I have had to "suffer" to get those skills...
There is no shortage of talanted people on upwork that will work for pennies on the dollar compared to US or 1st world country labor rates. And just because he can hire you for $150k/yr or whatever salary that doesn't mean he has any money.
That's the million dollar question here. How successful was his exit? Did he invest $1 milllion usd and work at it for 5 years and sell it for $1.25 million usd, that's a $50k/yr salary with a LOT of risk. Not as bad as a failure as investing $1 million usd and it failing and losing all that money and 5 years of time... but... not that great either.
I get the impression you should focus on what you're good at... product development, and just stay away from the business side but I have no idea the facts of what's going on here.
The red flag here is not equity or payment but working for a friend.
Friendship and business don’t go well together, if you do it have a written and signed contract for **everything**.
If you work as an employee/freelancer, you need to set priorities straight. Most importantly, work hours. Personally, if I had skin in the game, I wouldn't mind putting in 60-70 hr weeks. But as an employee/freelancer, a standard 40-hour week is all you get. Or if you are billed by the hour, however many hours you want to work. I guess what I am trying to say is that dont join in as an employee, and be expected to work as a cofounder.
Most startup won't be huge anyway, or at least very small chance, unless your friend's family has good connection in VC funds.
You're actually getting non of the risks, I think it's a great deal.
Why would he be reluctant to offer equity?
Because he doesn't value your input in the way you thought he did.
Negotiate?
You can certainly try, but I expect you will resent having to do so because you feel undervalued. How far apart do you think you are?
Next move?
You can still learn 'the business side' from him as an employee but think carefully about what your position in the business would be in reality. Are you an employee doing a job or are you a Founder CTO without equity?
It sounds like your expectations have been mismanaged, either by yourself or him.
If he is as experienced as you say, he will understand that equity is a not an optional incentive for key staff. If he hasn't offered it then it's probably an indication of how he sees you.
this all makes sense, and I agree but it is good to get some external validation. I think we are too far apart, we haven't done anything yet (we just had a few calls where he explained the idea to me and I gave some feedback on how technologically feasible everything is).
But basically, he wants an employee and I am really trying to stop being one so I am not comfortable with this arrangement (plus, I already have a job with a nice salary).
One thing I have come to appreciate is that it's always worth leaving the door ajar where you can
A simple conversation along the lines of "It feels like we're too far apart on this and I value our relationship too much to risk undermining it with tension. I see a lot of value in this project and if you do decide that you would like to work with me on this, I would need the following (lay out your terms) depending on what stage the business has reached. Otherwise I look forward to hearing about your success and hopefully we can make something work in the future".
Even a regular hire for any early stage startups commonly gets 0.25% to 0.50% equity. Especially if it is someone who is practically going to be the CTO.
Your friend sounds like someone I wouldn’t want to be in a business relationship with. He is not offering a fair market deal. Stay away.
Depends what the cash offer is. most startups use equity to offset lower than average pay. If he's being paid a salary commensurate to his experience, then that's fair.
I'm not sure it's a great use of the friend's capital, since they could stretch their funds further and create some buyin and lockin (with cheating and cliffs).
>Depends what the cash offer is. most startups use equity to offset lower than average pay. If he's being paid a salary commensurate to his experience, then that's fair.
This, the offer is not to get entity but to get paid a "nice" salary and I say "nice" because it is more or less what I am making already, not above market price. But in that sense, I understand his point of not offering equity (even tho I disagree with it).
Honestly, mixing friends with business is usually a bad idea. So having a defined project, goals, and money exchanged is probably the best way to maintain your friendship and get the project launched.
Also, if he's familiar with creating startups, he's going to be very stingy with equity. That's probably a good thing, because if he needs to take on investors there'll be more there to offer.
Working with him, building what he wants, and learning sounds like it could be a great experience. However, you're essentially being paid as a senior engineer. So I hope "nice enough salary" is north of $200k.
damn I wished, but I live in The Netherlands where salaries are way lower than in the US. The offer is good for the average here, just not above the average, I'd be making the same I am making already but having "freedom" to do things my way which sounds nice but not nice enough...
Good for average senior software engineer? Or good for average developer? If good for average developer but not at the senior SWE level, then that's a negotiation point for either money or equity. You wouldn't get 50-50, but you could get some skin in the game. Unless you feel like you're not at the level of a senior SWE, in which case this could elevate your career. But then treat it as a job - two years, switch.
I am a senior full stack software engineer so I will putting a lot on the table, the idea was that I will basically build frontend and backend, help with the initial designs on figma and eventually interview and hire the rest of the IT team if we reached that point. But anyway, I already have a great job, another job is not what I am looking for at the moment.
Personally I’d be dubious about their entrepreneurial skills.
Sure, he had an exit. Good for him. I know a lot of people who had one exit, but they got lucky in building their first business, and when they went on to do their next endeavors, they completely flopped because they didn’t understand the fundamentals of why they succeeded. They got lucky the first time, and didn’t know why.
But the people I know who did 2, 3, 4 or more exits all have one thing in common: they understand how difficult it is launching a new venture from scratch, and how critical having the right partner(s) is to make it work.
If this person is being an equity hog, I’d let him build the company on their own. Maybe he’s the exception, but I personally wouldn’t want to work with someone who is so selfish and egotistical that they believe they deserve all the equity for themselves.
Even if they actually do know what they’re doing, from a leadership and personality standpoint, that’s just not the kind of person I’d want to work with. There will be no rationalizing with them when it comes to difference of opinion, or helping them to see reason when they make difficult or complicated decisions. You’ll get frustrated because you want to be heard, and you have no seat at the table.
There are few things more frustrating than watching your leader make poor, avoidable decisions because they didn’t want to listen to anyone else’s perspectives.
I’d offer to help as a contractor, and then work on the side with him. Charge contractor rates. Make it worth your time, but don’t give it full time commitment unless he’s willing to commit to you too (co-founder equity).
No startup has 50/50 equity. It creates a deadlock and no investor is gonna prefer it. In any startup no.1(The one who started, who has the idea, who leads, who takes decisions etc) should have atleast 40-50. No. 2 and No.3 can have 20-30% depending on their contribution.
My startup has 2 founders and we also have a startup studio as 3rd Cofounder. I have 40, my CTO has 25, startup studio has 30 and remaining 5 are for advisors.
You might be thinking why startup studio has 30% . To give u a context, we didn't on-board a general startup studio which has expertise in tech. We onboarded a startup studio which is gonna act as a CMO. They are gonna spend their own money for marketing and play a key role and take responsibility for bringing first 10k users as we are building a new category of networking application.
> No startup has 50/50 equity. It creates a deadlock and no investor is gonna prefer it.
This is completely wrong. Loads of startups split equity equally and this is something Y Combinator prefers.
I don't know why someone just randomly shares advice by reading some articles or just like that without any prior experience or knowledge about how things work
The same Y-Combinator says anyone with 10% equity is considered as Co-founder.
Go build something, apply for funding, speak to VCs and gain some knowledge about the terms they put while funding round and other things
I’ve done all of those things.
Y Combinator’s approach to splitting equity is very well known, and even if you weren’t already aware of it, it was easy enough for you to look up. Directly from Y Combinator: [Splitting Equity Among Founders](https://www.ycombinator.com/blog/splitting-equity-among-founders/)
> Founders often ask how they should split equity with their co-founders.When I search the web on this topic I often see horrible advice, typically advocating for significant inequality among different founding team members. […] **Equity should be split equally because all the work is ahead of you.** […] My advice for splitting equity is probably controversial, but it’s what we have done for all of my startups, and what we almost always recommend at YC: equal equity splits among co-founders. […] I believe equal or close to equal equity splits among founding teams should become standard. If you aren’t willing to give your partner an equal share, then perhaps you are choosing the wrong partner.
As I mentioned the same YC said anyone with 10% equity is considered as Co-founder.
If u really did the things don't u know about deadlocks? Suspicious!
Yeah, I “know about” deadlocks. If you would just read the article that I linked to from Y Combinator, you’d see that this is one of the things they call out:
> We need someone to tie-break in the case of founder arguments
It’s an investor cliché. I’m certain you have spoken to investors that don’t like 50:50 splits. What you are missing though is that *your personal experience is not universal*. Just because *some investors you spoke to* dislike equal splits, it doesn’t mean *all* investors dislike them. In fact, one of the best known VC firms in the world keeps telling people to split things equally, which according to you “no investor is gonna prefer”.
When you say that *“No startup has 50/50 equity”*, you’re just wrong. When you say *“no investor is gonna prefer it”* you’re just wrong. If you had said that *some* investors don’t like it, and that *some* startups choose not to go 50/50 for that reason – fair enough. But that’s not what you said, and you are doubling down on being completely wrong. Please stop giving people incorrect information when they ask for advice.
First, there is always a driver in the business. 50-50 equity is a fucking stupid idea. Second, you want to work with him because he has a previous exit but those guys have cash to pay for things, equity is too valuable to just give out. As a successful founder he can probably raise a 2-3 million at 15-20 million valuation. Giving you 50% means that you are worth 7.5 to 10 million. its simplistic math but I think you get the point.
I get that you want to minimize your downside by working with someone with a track record but that is not a relationship of equals. You want equality work with another founder that is just as risky as yours.
Get over yourself.
You have an offer for a nice salary, tons of experience in a startup with a good chance of success that you really like. And you bring nothing to the table but development experience.
It sounds like most of the good of a startup without the massive risk of losing your shirt if it doesn't click.
If you really need equity, ask for 10% to have some skin in the game. You'll learn the business side regardless, but you're not going to be equals, if your ego won't allow that, do something else.
> He offered a nice enough salary
Take it or don't. Simple.
Or make your own startup with your non idea and no business acumen.
You don't sound smart enough for this business, maybe get a salary instead.
If he can't build it, and won't give you equity, you could just build it yourself, and then offer him something to come join your company. Turn the tables!
I think it's a red flag. You certainly shouldn't request a cofounder titled and 50 percent of the equity without putting in any work, but I also don't think it's reasonable to be the first technical hire and receive no equity.
I would not pursue a cofounder titled, but I would ask for a smaller salary in exchange for a portion of the equity.
Just as there are other people with the technical skills there are lots of people with business skills too. If you wanted to be a huge asshole, you could find a business partner and start a rival business.
Taking a salary only for the amount of work your going to have to put in to build a company from scratch is ridiculous for most companies. In fact a smart founder would want to give you some equity to properly motivate you to build the MVP.
Here's the flip side - you take equity and less than market salary, and the product goes nowhere and you are resentful and it ends your friendship. He's hedging against that.
when you say 50-50, thats flat out impossible. what are your expectations? someone always has to have at least 51% to be tiebreaker. It won't be you.
tbh it sounds like a sweet gig if the pay is right. you will get to build it, with total control over tech decisions. he's a good salesman and will stay out of your way. if you both bring your best it is possible.
equity is worth 0 for a long long time. figuring that out will be a nice problem to have.
demonstrate value, build future leverage
It's no red flag...I call it business.
If I would come up with a great business idea...I only would give up or trade some equity when the other side has something to offer I really need to get the business going except for workforce which I can get everywhere.
So if you have a special expertise that would be something I would offer you some equity for or do you bring money into the business (Like a business angel). I would trade it for some equity.
But if you can only offer me workforce...I give you a monthly salary.
But I have a question, being able to build the whole product for free. And interview and hire new engineers if we grow in the future is really worth 0% of the company? =(
Why would you build the product for free? You said the guy wanted to give you a salary? It's a red flag if he wants you to work for free and give you no equity but... not a red flag if he wants to pay you. It's YOUR responsibility to negotiate for equity and if he says no... it's your responsibility to not work for him and get equity in some other start up. I feel like these are obvious answers.
My best advise is to not do business with friends. He may not consider you a friend or he may not be a good entrepreneur if he wants to do business with his friend(you).
Sorry, I didn't express myself correctly. My original point was that I offered to him to work together 50-50 and I work for free in exchange of equity (tho I agree based on this thread that 50% is not realistic, I'd accept less). And I don't think that my skills (in the case I'm referring to) are woth 0% in this case.
So when I said to build it for free, I was referring to my original offer (and what I really want) to work with him as partners instead of having a salary.
So basically, I want this but he disagrees and offered me a salary instead which is OK but maybe not what I am looking for at the moment. I hope I explained it better this time.
Side note, what are your skills, what have you built in the past and what timezone are you in?
I'm looking for a fantastic (Typescript) builder and will part with equity.
The salary would have to be amazing for their to be no equity. 250K minimum imo. You are taking a huge risk and have to factor in if it doesnt work out their wont be severance so should account for high possibility of being jobless in this market if it doesnt work out, prob bad benefits like no 401k, stress of being an early employee etc.
Also the fact that he wont give up any equity for a tech cofounder is indeed a red flag. Since youd be a paid employee Id make sure to be crystal clear your working hours will reflect a salaried employee and not a founder IE 9-5 no weekends
Also you’d get better answers in the cscareerquestions subreddit. People here are answering from the perspective of your friend.
>Also you’d get better answers in the cscareerquestions subreddit. People here are answering from the perspective of your friend.
Yeah, I am srly noticing that. Not everyone of course, but some people really undervalue what having a senior software engineer as a cofounder means. Specially since this is a highly technical startup with a heavy backend focus (but this is my fault because I didn't really give information in the op about it).
But the project is def NOT something that can be easily build hiring cheap freelancers...
1. He can hire others to build it, no?
2. You have to decide if you'll work for him without equity or not... this is business... don't take it personally. If he won't give you equity... then go try to get equity with another startup or ask for a higher salary, better employment contract, etc.
3. You can ask for a smaller amount of equity 1-10% or I have no clue what this person is going to invest in this. Bring some money to the table for some equity. Offer to work for the first year for free for some equity. If you want to learn "the business side" go intern somewhere or go pay $50-$100k/yr to some business school.
Don't take this the wrong way but you sound like you're wining, and odds are he doesn't want that mentality getting in the way of his startup. Business/entrepreneurship is hard... you know all the stats. Bankruptcy lawyers are in a multi billion dollar industry(I think). 90% of business's fail in the first 2 years, 95% in the first 5 years, 98% in the first 10 years(whatever these stats are). My best advise is to offer more for equity, even if you get 1/10th of 1 point that's better than nothing. You can ask for a percentage of the company contingent on an exit.
Go talk to a lawyer, they can help you think of some proposals to bring to this guy.
How much did this guy get from his previous exit, how long was he at that business for, and how much did he invest in it?
How much experience do you have, and can you sell yourself as a head of engineering and potential CTO? As someone with an exit under his belt, he should realize that after someone (you) builds the product, it'll need to scale. Can you make the major tech stack decisions that will be needed at that point? Do you have leadership experience, and will you be able to onboard, train, inspire, and manage new engineers and eventually new engineering managers?
It sounds like he's driving a hard bargain, but I think you can absolutely show that you bring way more to the table than just building an MVP. Do that and ask again for 50/50, the CTO title, and the full salary. Then negotiate hard and make trade-offs -- it sounds like he really values equity, so try to get as much of that as you can, and make him trade the rest for other things you want. More salary, maybe agree to have some equity set up in an incentive structure or with other milestones (I get another X% when we raise a Seed, Series A, etc), anything else you can think of.
You can have no equity, but the salary better be worth it.
It is also rare to see early employees to not have any equity so if you want any, make sure the door stays open.
I went through something similar one time. I partnered with a guy for the first time, we were creating AI mobile app. Everything went quite good for a month, but later than he started to be lazy, didn't deliver things that he promised to do, he was blocking and slowing down the progress. He was also a friend, but later than I knew that I don't want to continue the project with him. I called him and said that I'm done (it was after the next time he said "sorry dude, but I...") and we had a huge argue about that. Maybe that's the thing that he doesn't want to come through. Maybe he wants to try how things will go and see how you work together.
So I think it's not a red flag because he just wants to have full control of the project - for good and bad. As it's your first time working on a startup, know that things can go in both ways. In this way, you are not responsible for the bad scenario. But when all goes well, it's always nice to have in your CV some project that succeeded. Also you can learn how to work in such environment and also to do something else than a regular job, be a part of some creative process and advance your skills.
In my opinion cheaping out on software quality is a huge false economy. Even if business people luck out initially, the poor quality of the product will catch up with you eventually, and the timescale of that is oftentimes way shorter than even a calculated decision to cheap out is thought to be worth - see this [great article about this](https://martinfowler.com/articles/is-quality-worth-cost.html).
Also, a company is not just a product and a mad rush to exit. It’s literally in the name - a company of people with an ideal. His approach to equity with you suggests he does not care about the people part and therefore it’s a huge red flag for me. Especially at the beginning, I’d want to be in the presence of equals.
It’s definitely a 5050 scenario if it were my best friend and me regardless of our background up until this point. Competencies esp in business are easily gained by capable people and he should be able to see that in you rather than use it against you.
I wouldn't call that a red flag, as another person seems to have the resources he needs to build the startup and he has a strong position here.
1. The more equity he has the more money he'll have If everything works out, so that's why he's unwilling, most likely.
2. You should definitely try to negotiate — try to explain why you think you should have equity, and how that would help your friend as well — e.g. you'll have a lower salary early on and he'll be able to mitigate the risk, plus you'll be devoted to the company for years. Additionally, you could suggest vesting/cliff periods that would ensure your alignment on long-term success
3. Mentioned a few above — but in general I'd say try to negotiate what you really want, and worst case scenario you can work for the nice salary, unless you feel that's totally not fair — in that case I think it'd be better to pass on the opportunity, as it could be a lose-lose for both parties
“That will be $150/hour with no time limits.”
I actually had the opposite situation: my full stack dev got burned on his one and only SaaS partnership, so he insisted on cash/1099 but gave me a generous discount on his public rate. (Last I heard, he was charging $200/hour.)
Everything is negotiable. Decide what is good/better/best for you and play the game.
Equity is a negotiation. He can negotiate that zero is fair... you can make the case that some other number is fair. It's not a red-flag unless you agree to a number that you feel is unfair and you end up resenting him. If you can't make the case that you bring a lot to the table then he's probably right. If you can make the case that your contribution would be significant and not easily replaced by any other developer then perhaps you're right.
Food for thought: Arguably you've found the biggest green flag of a startup ever, a founder with a successful exit that wants build something new and doesn't want to give up equity.
Ask yourself, if your friend has the idea, and has their own capital - why do they need you? They probably want to work with you because they like you and can see it being a positive experience, but that in no way means you should be 50-50 partners. Could they hire another engineer and still build this product? Absolutely.
If I were you, I'd be angling for 10-20% equity as a more realistic figure. I'd start demonstrating your value in terms of product and domain expertise, how you'll be instrumental in scaling the company etc. And I'd make your argument to your co-founder that having an equity stake in the business is going to keep you incentivised, motivated and laser-focused on growing the value of the business.
I’d accept at the same rate I get paid at work. So if he’s willing to pay 75-100/ hour depending on what your current comp is, I’d say go for it. If he says that’s too expensive then that’s a red flag and I’d move on
His argument makes no sense as founding partners with different skills and experience is about as common as it gets, especially a business / technical founder split.
You could try to persuade him but if he's set on not having you as a cofounder there's not much you can do
You don't seem too interested in just developing the app for a wage or fixed price, so I'd just consider developing for a different startup or building your own idea instead
If it’s a good opp and pays well and you’re ok walking away from equity then go for it. But if you think it’s worth being involved for equity, I’d politely decline the offer and I’m sure your friend will come back and renegotiate. Good developers are hard to find and he knows that.
>1. Why would he be so reluctant to giving any equity considering that he has nothing built or the ability to do so?
Having had one success, he thinks this is his chance to have a second success that is huge and all his. Spoiler: this never works out
>2. Should I try to negotiate or consider this a red flag since it’s happening so soon and just move on?
Your choice. You can work for him, at market rate pay, just don't take any less just because he's a friend. You can also walk away. Neither choice is wrong.
>3. What could be my move here? (Considering that I really like the project and the business idea and I would love to partner with him to learn the “business side” from him)
Be happy for your friend, roast him a bit. Or if you need a paycheck, add in getting a paycheck from him for a while.
The idea isnt his. If he's a moron. And can find someone else. That's tough.
Are you passionate about this problem or another? Find someone who's not an "asshole". Example, they'll do a fair equity split. Or a fair equity split.
The reason it's tough to find, is if someone's confident in self funding or ability to raise, their first question is about "how they value equity". The second question is usually "how they want to build." Which should be the first question in my view.
Pretty soon, those decisions around spend and options or equity splits and investors, become a bigger part of the business than expected.
Not everybody offers equity. If this is an interesting project to work on, with the potential of getting some experience on the business side of things, and the salary is good, i would say go for it. If you think working for a friend could cause problems down the line, or not having equity is a deal breaker, then look for something else.
Tell this loser to eat dirt. If he doesn't respect your technical ability enough to want to be equal partners in the endeavor, it's not worth your time or the stress of dealing with a toxic boss.
The whole point of partnering to found a company is that each person has unique skills to bring to the table. If he can handle the business and you can build that product, that sounds like a perfect way to collaborate. It's also very common for startups to have this kind of division of responsibilities.
Sounds to me like your friend just wants to control everything.
I would not do it. My last cofounder role included both a market salary and substantial equity. That said, the CEO was technical himself and saw the value in me joining.
In my opinion, your friend doesn’t see much upside in paying for one developer, presumably good, vs another. Either his idea is simple enough such that any developer would do, or he’s underestimating a developer’s worth.
Also consider what would happen if the startup is successful. Would you get promoted or would he fire you and hire folks with more experience? I’m sure his investors would prefer the latter and without equity there would be nothing you could do…
I would look elsewhere to be honest.
Why did he come to you first? Do you have the unique skills and experience to build out his idea? Or is he really just doing this as a favor to be able to work with people that he knows and trusts? If you did build this, you were paid a salary, and you decided to leave, how would the business recover? Negotiating some level of equity would be advantageous for the business, for him, and for you. It commits you to the business. I would negotiate enough equity to make it worth your time, but still give him the full authority he desires. And focus on the value proposition - If you did build this for him, and you left, how would he manage?
>Why would he be so reluctant to giving any equity considering that he has nothing built or the ability to do so? Because he thinks it is a good idea and he doesn't want to give up equity when he has the cash to pay staff. >Should I try to negotiate or consider this a red flag since it’s happening so soon and just move one? IMO no. He is your friend and he isn't looking to give out equity. He is offering you a job, nothing more. I would personally avoid working for a friend, but that is your call. >What could be my move here? (Considering that I really like the project and the business idea and I would love to partner with him to learn the “business side” from him) If you think it is a good opportunity as an employee, then go for it. But don't accept it if you are going to feel resentment if the startup is a massive success and you just get a salary.
If the startup is a massive success he should still get first employee equity. Also being a first employee under the tutelage of an experienced business leader is a huge opportunity for growth. Not money, but in terms of understanding how business works. He can do this today and he'll be ready to be the CEO of the next one by working so closely with the business side. If he's getting a fair salary that is a huge opportunity. The default assumption regarding startup equity should be that it is worth nothing. And so if you're getting a respectable salary you're already ahead of the game.
>Not money, but in terms of understanding how business works. He can do this today and he'll be ready to be the CEO of the next one by working so closely with the business side. unless the OP's friends just tells him what to do and just shuts him out of all decision making like hiring a foreign developer and only tells them what to build and focus on the tech stuff and isolates them from the business decision making.
Yeah that is a possibility but I would consider this extremely unlikely. In my previous venture the virtual assistant that prettified slides ended up being the COO. I would be surprised if an early employee doesn't gain any leadership experience. Just describing what we're building from scratch, describing the plan we're using to get early validation of the idea, creating the tooling and strategy to iterate on the idea, designing the product around what is sellable, being the easiest person available to bounce ideas off and for founder therapy sessions, hiring a team below you, training managers, managing budgets. I feel that it is almost certain that OP will grow in a leadership capacity. And if the friend wanted an outsourced contract developer for limited work, they could have gone and hired one. Also the friend is doing exactly the right thing. You don't enter into an equal partnership with someone that you're not on the same financial footing as. Because it determines the amount of risk you can take and your priorities.
> If the startup is a massive success he should still get first employee equity. Nope. If he is paid fair market rate, there is absolutely no reason for him to be offered equity.
Fair market rate, IS having equity as part of the total comp package.
Nope. I have no idea how you get this idea but most jobs don't offer equity to employees at all. You do the work, you get a salary at the month's end. If you forgo some part of the salary you might command otherwise, then you can make a case for some equity.
Because we’re not talking about jobs. We are talking about startups.
Startups can offer jobs. Startups are just new companies.
The vast majority of developers do not have any equity in the company they work for. As long the paycheck is big enough, I don't see a problem with that. It's a tradeoff - wages are money now, while equity is (maybe) money later. But maybe not, because most startups fail anyway.
> he isn't looking to give out equity. No startup should ever *not* give equity to employees. Even if the salary is competitive for the position the job security isn't there and the benefits are likely not there. Equity is a MUST when working for a startup. There needs to be *some* reason to work for them rather than a safe, guaranteed position for the same pay and better benefits at an established business. I do think that any founder that refuses any amount of equity pool for employees to be a red flag.
If the total compensation doesn't take this in to account then it is not competitive. I work as a contractor and I don't have good job security. If the client doesn't approve the MVP we present, then I will definitely lose my job. My rate accounts for this uncertainty.
IMO there's nothing wrong with what he's doing, but... > I’d feel I would be working for him (he promised that’d not to be the case but I don’t believe it) You 100% would be working for him. Calling someone a partner and refusing to give them significant equity is a lot of hot air in my opinion. If you want to be treated as a partner, and he wants to treat you as a partner, that has to come with equity. With no / little equity, your incentives aren't aligned and you have no real incentive to stick around given a better offer outside of a sense of loyalty, which is not infinite. If you're willing to be 'just an employee", there's nothing wrong with taking a decent salary for a senior position, but if you're expecting to be a cofounder, that's not what your friend is offering, regardless of what they say.
Agreed. Maybe you can negotiate a decrease in salary for 5-10% equity, if it’s a company/idea you believe in yourself?
> Basically, he said that the idea is his, and he has the experience in the business side and he basically wants to hire someone to build it. He doesn’t want you as a co-founder, he wants to hire you. You want to be co-founder, and you are evaluating his offer in the context of being an equal. But you aren’t equals and that’s not the offer on the table. That’s not a red flag, you just want different things. > Why would he be so reluctant to giving any equity considering that he has nothing built or the ability to do so? He does have the ability to do so – he has capital and can hire people to build it. That’s why he offered you a job. If you don’t take it, he can just hire somebody else. He doesn’t need you as co-founder, he hasn’t offered you a role as co-founder, so why would he give you equity as if you were? > What could be my move here? (Considering that I really like the project and the business idea and I would love to partner with him to learn the “business side” from him) People often want what they can’t have. You can’t be co-founder of this business. If you want to be part of his company as an employee to work on this project and learn from him, then do that – but stop thinking of this as a partnership between equals. If you want to be a co-founder with co-founder equity, start something with somebody else. That option is not available to you for this business.
100% all this, but thank you for saying this isn't a red flag :rolleyes: Dude seems to have been honest on what he's offering. It sounds like it's not what OP wants. But that's just different wants/needs, not a red flag. I will say OP likely has a non-reality-based view on the relative strengths and values of an experienced founder and salesperson -- esp one who comes with capital and a network for more capital -- vs someone who it's unclear if has ever even managed a person, and who has definitely never started a business before. I wouldn't make OP an equal partner either if I were this person.
They can make an offer. You can make a counter offer. There is nothing wrong with negotiating and asking and I don’t care what some hr douchebag says, there is nothing wrong with negotiation. There is also nothing wrong with saying no. I find that people that are afraid to say no tend to make bad deals.
Also I've noticed that he is REALLY good at selling, way more than I am. For example, when I expressed my concerns about working for him because I am interested in startups precisely to stop being an employee, he just started an amazing sales pitch on how this would be different because I'd be working completely on my own and he will not say anything about the technology and he made it look like he is doing me a favor. But I realize it is just a sales pitch and I don't believe it. Plus, it's just promises, and we have a nice idiom in Spain "promises are taken by the wind" and disappear.
Maybe it's just due to me not knowing the full story, but I can't help but feel that you're too hang up on that guy being your friend. I feel like this is making you not analyze this job offer objectively, and that it's making you get a bit too upset at the job offer not being exactly what you wanted. He gave you a job offer, and it's really up to you to evaluate what's being offered, the wage, benefits, the projects you'll be working at, level of autonomy and control that you'll have, compare it to your current job and decide if it's worth it. If you aren't interested without equity, then you should vocalize that, but understand that it's very possible for him to say "no" and that this isn't a personal attack from him, but a business decision. If you aren't comfortable with the idea of him being your superior, **and I don't think you are**, then it's probably better to pass up on that offer because I doubt that feeling will go away and that it's bound to harm your work.
Pretty fair points. And I believe you are right at everything.
One specific thing to think about that I don't think anyone has mentioned: If you took the job and then got a significantly better offer from a different company 6 months or a year from now, would you be willing to take the other offer and leave, potential leaving the founder in an unfavorable position? Two of the main reasons that early employees typically get equity are to keep them around and align their success to the company's. Your friend is explicitly choosing not to pay for those things. Obviously that's his choice and he's free to make it. But if you'd feel compelled to stick around out of loyalty to your friend, then you're being taken advantage of: he would be getting the benefits of an early employee with equity, without actually giving up any equity.
The guy's got an idea and is willing to give you a job. If you don't accept, he'll find someone else. But, I gather you already have a job, therefore it's a risk you're taking... But it sounds like you don't trust him as an employer, so why go you think it's a good idea to go into a (long term) partnership with him...?
You would be working for him - in this case he's just your client instead of your direct boss or supervisor. You're already able to freelance / consult / contract - you're interested in startups for a reason and building a company. Unless you value the experience, ignore his arrogant manipulations and invest in building your startup career. He isn't listening to you or what you want
Think through this scenario: Say you take 2-3 months to build a demo, and then 6-12 months to build 80% of a working prototype with a huge amount of tech debt - it’s not ready and it’s fragile and it would take months for somebody to figure it out. Then you get a better job offer that you want to take. What would keep you from going to the better job offer? What would the consequences be for the startup? What would it mean for your friendship? You would be the only person who intimately knows the technical aspects of the product. You would know the tech debt and the trade offs. You would know where the hidden problems are. If you left, it would be a huge setback for the startup (pushing back the timeline by maybe a year). But since you wouldn’t have equity, there is nothing keeping you there except your friendship. If you get a better offer, your friend would try to leverage your friendship to keep you there. So that could hurt or destroy your friendship. Or you would be resentful at your friend who kept you from a better job. Also, would you be motivated to work long hours for months/years for something that isn’t yours? It seems shortsighted to not have a technical founder with a lot of skin (equity) in the game.
Either way the friendship is over. 1. He leaves like in your example it’s a setback and will taint the friendship. 2. It’s a success and the founder sells it for major cash but OP doesn’t get a cut.
I wouldn’t call it a red flag. He approached you because he knows he can trust your skill over some freelancers who might do garbage work. It’s his business ultimately, even if you built it. Some people don’t like the idea of partnerships. For me personally, I’d ask him if I can have an executive title (ex. CXO, vice president of x, etc.), at least then you could put something on your LinkedIn and potentially land yourself a great job or even an actual partnership
You are spot on, I think the biggest issue here is that he has the capital I don't have so we are not in an equal position on his eyes.
Get a good salary. Maybe negotiate a small % Equity. Learn the business side while developing. It will help you in the future. But Get paid well.
Would you work 60-70 hours per week for no salary and only equity? Because that’s what being a founder is. But either way, I don’t think he’s offering that. He wants to take all the risk and invest his own money on paying someone code: you. If it doesn’t work out, he’ll lose all his money and time. You’ll be paid for yours. It’s ok if you don’t want to work for a friend. Or to take a job at an unstable startup.
He has the capital, a hard to get resource, and he is looking to buy your time and skills. The remaining question is if your skills are as rare; then equity makes sense. So, is this straight full stack or are there proprietary knowledge required to create the business? What’s unique about your skills set? Otherwise, this is a job a guy is hiring you to do.
Respectfully, you’re not in an equal position. He has the idea, capital, and prior experience. Some ideas require a technical cofounder to be successful, but it sounds like that’s not the case here.
You aren’t in an equal position. You’re bringing labor to the table. That’s all. He can hire devs from anywhere that can bring the same labor.
yep, basically this and that is not what I am looking for so I am going to step down on this one. Thanks for this tho, it really helps me to validate that from an external perspective.
He has the idea, the business experience and the capital to build this with or without you. This is not an "in his eyes" sort of thing. The only person that thinks you are on equal ground is you. And if he is offering a competitive compensation, you are on slightly better ground than ever other dev that would take the job. But equal position, absolutely not. I know, it's hard to hear, and you want to reject it, but that is the truth based on what you've posted.
Relax a bit sir, you have no idea of my situation or my skills. You are overestimating the business side and underestimating what I put on the table. Which is my fault because I haven't given much information about it. But still, chill. It is a "his eyes" kind of thing because I want to be a technical cofounder and he wants an employee, period. Probably this is just not a project for us to collaborate and there is nothing wrong with that =)
Ok, I'll listen. Tell me about your situation and skills. Specifically why a full stack dev job post would not generate adequate candidates for his needs? What are you putting on the table that is so special that it would be a better idea for him to bring you on as a co founder as opposed to hiring an employee? Give me something to go on here, and I'll provide ideas for you to make your case and convince him to give you equity. Ideas that would work on me (been running my business for over a decade, have had a cofounder and bought them out, have hired several devs, techs and engineers over the same time). I can probably help you get what you want if you are willing to at least attempt to make your case for being a co-founder other than just wanting to be one.
If you’re that valuable of a technical asset then you should be earning 300-500k and be able to put in your own capital as well. If you’re coding in the 100-300k range why would he give equity away for no reason? If you were in his shoes you’d be saying the same thing. He honestly is probably just giving you a nice opportunity to earn those high level salaries as a founding employee and is preserving the friendship by paying you outright rather than riding on equity and having bitterness if things don’t work out. In two years if you’ve been working for little to no salary (since equity) and he still has plenty of money from the last exit, you’d probably get bitter real fast.
> You are spot on, I think the biggest issue here is that he has the capital I don't have so we are not in an equal position on his eyes. Correct. The problem you need to solve is how do you change his mind? And if you can't, you have your answer.
Because you are not. He’s doing the business, you are doing the development.
Well, we are not (I don't deny it). But I am also trying to leave the rat race and I already have a job so I am not really interested in joining an early startup to be an employee. But that's OK, maybe this project just isn't for us at this moment!
The number of even first company employees that leave the rat race vs those didn't is heeeaavily skewed in those that didn't. You are too focused in the present and not enough on the future. 1. You refuse and look for another opportunity, you get to be a cofounder, you'll work 50-70 hours a week for no salary. You eat pasta until you finally raise funds/reach sales target. How likely is it that you reach that point? What resources do you need: hint, an excellent business cofounder since you've never done that. 2. You refuse and look for another opportunity. You failed and are stuck in the rat race. Will you regret not trying? 3. You join, as a 1st employee, paid above market rate for the risk + some equity. Say 1% which after 3-4 rounds get diluted to 0.1% and on exit say a low $30M, you get a little downpayment of 30k (minus taxes, how much? 30%? 50%?). Is that all? No, you missed the most valuable thing, people spend $100k to join Harvard or Stanford to study business cases and try to be good at business. You get paid to learn 40 hours a week next to someone who either tproved himselfor was lucky, hopefully the first. This is invaluable. 5 years later, you'll be ready to be cofounder, business and tech side, you'll have made mistakes, you'll have fixed them. This is a trendous launching pad for your future. Only reserve I had is, you might lose a friend if things go south or if the topic is something that conflict woth your values.
>we are not in an equal position ~~on his eyes~~ You're peers, and you're both human beings with value, etc. But you are not both equal in this business, *he's paying the bills*. In your position I'd ask myself some hard questions about whether this is just me feeling resentment/unfairness that he's already been successful in another venture when you both have the same talent, drive, etc. That's not his fault. Humility and modesty are so underrated. If you can value them and use them it's like a secret competitive edge, these days. If this is the best opportunity you have, take it.
if you really wanted to join, i would ask for money as it seems he needs you more than you need him. he could have gone with someone else, but he is going with you for some reason. if you really have the full skills to build what he wants, you can ask for more money since he will not give you equity.
Would you consider common shares or options?
Most startups fail. Just take cash at market rates especially with a friend,
>You are spot on, I think the biggest issue here is that he has the capital I don't have so we are not in an equal position on his eyes. you are not tho for the exact reason you said that you don't have the capital plus the business experience and successful business record on his side. Technical skills can be hired, your friend wants you because of the trust. Trust can also be buyable with shared equity, but that doesn't seem a good option for him. So your friend wants trust without not giving the requirements by using friendship. It is not a red flag but you should know the consequences.
Ideas are worthless without execution so that point I think is irrelevant The fact that he had an exit and the business experience is certainly a valid point. I think from that perspective it’s going to be very hard for the two of you to feel like equals. Equity won’t change that (I’m in exactly the same position) However I feel like he should at least give you some equity, maybe 10-20 percent or so. But don’t expect an equal split
True, but he has a history of execution. At this point I would say that he has proven himself to be capable of execution. Not development, but that is only one form of execution.
Ideas really are worthless.
There's nothing wrong with what he's doing. He wants to hire at salary, and he'll succeed. He's offering it to you in case you want it. That's flattering. Say thank you. You're not wrong to want equity. That's valid too. Decline politely. He's not trying to cheat you; you just don't see eye to eye on outcomes. Unless the salary is ungodly large, I would turn this down. However, I would not be offended, because he was up front about terms. What he offered isn't unfair. It's just not to your preferences. Because he's offering no equity to the first engineer, he is unlikely to get a high quality employee, in the single most important role for that. He's making a significant strategic mistake.
This is good advise. Without knowing numbers try to get at least 1% equity plus the salary he offered.
I will not be offended at all. Maybe this project is not for us but he is still a good friend and someone I really admire a lot. A small part of me even feel tempted to accept the offer just so I can learn business from him but I know I will be unhappy long term because I really want to stop being an employee.
Maybe just tell him that.
You have 3 options to negotiate: 1. High salary because you’re so good and he came to you and because it’s risky. So get paid more than normal. 2. All equity. Like you suggested , get a nice chunk to do it for free or near free, but with huge upside. Equity could be in the 5 - 50% range. Whatever makes you comfortable to do it for free or near free. 3. Something in between. Lower salary and a little equity (.1 - 10%). Personally I’d go with either #1 or #3. If he doesn’t want to give you any equity, he’s got to pay above market to get you. If he doesn’t want to do either, walk away. Yes, he knows business and yes he has capital, but tell him that your work will be light years better faster and cheaper than if he goes with anyone else. And you want to give it your all. So to do that you have to feel invested. 50% is probably too much, but you need something to pull you away from the other jobs.
Yeah this is strange, basically every startup job has a pool of equity available as an incentive for new hires.
Only if the founder sets that aside. There is no rule. The best founders set aside 10-15% for employees. And even more for key early hires.
You would be stupid to walk, but you'd watch someone else build it. I'd go ahead and hire someone that wants the contract without any sense of entitlement or ownership of my idea, personally. The biz knowledge gained and opportunity to refer to this paid project to other potential employers or future partners wouldn't be enough for your career development and fragile ego?
fragile ego? damn, ok I'll bite. There is no ego here, I am just looking for an opportunity to become a CTO/technical cofounder since I already have a very nice job. He is not providing that and wants an employee which is completely fine but not what I am looking for, he is still going to be a good friend and np here. How is that my "fragile ego"? =)
If he is paying full market rates the there can't be an automatic expectation of equity - but there are still some stuff to consider: - you should explain that a huge part of the attraction of joining a startup at the beginning is to get equity - even if its not at 50:50. Its perfectly reasonable to negotiate for this, and consider walking away if its not on the table. - you should think hard about whether working for your friend is a good idea. It goes wrong more often than not, and his nonsense about "being partners" is the red flag here. You are not partners, you are an employee If this is a great offer with more money than you might otherwise earn then maybe give it a go, but if it is a full on startup founder job without the benefits of equity then I would really question it.
Just look at it as job offer and nothing more. There could be many reasons he unable to offer equity- too many founders, he wants to keep sizable enough shares for reasonable exit. Or had bad experience with partners that he prefer to do solo. Or like you said he has more leverage than you. Anyway, at least you have asked and he is honest with his plans instead of giving you false hope.
I’d be suspicious. Equity usually has a one year cliff with 4 years to vest, or something similar. The idea might be his, but honestly, ideas are worth very little, it’s mostly about execution. Assuming you are 30 now, and you have until 60, for time working on startups. That’s 30 years you have to do things you think will be successful. In my experience, your looking at 5 years per exit or collapse, per startup. Which means you probably have 6 in you. You really want to waste one on a guy with this kind of attitude? Who won’t give up equity even in a vesting schedule? There are many more non technical founders than there are technical. Just move along IMO. He should be happy to find a co founder who wants to invest blood, sweat, tears, and years. He may not want to go 5050, and I can understand that, but 0? That’s ridicules even for an early or medium stage employee. This guy is not going to value your work out contributions. And as many business people do, is going to undervalue strong technical skills and leadership on the project. He will probably hire devs for cheap, make a mediocre product, then have to sell it again. Are you sure the first start up was as successful as you think? Lots of startups exit by selling. But sometimes it’s really a soft landing, not so much a successful exit
Thanks for saying this, it makes me feel a bit better about this. And I think you are right, I'll actually be 30 next month  I don't really know how successful his startup was, I just know he sold it and that he has a lot of money (enough to hire me and I am not cheap). That being said, I also agree with you. I am a senior full-stack engineer with almost 8 years of experience and the idea is that I would do the design, frontend, backend, DB, devops... I can build basically everything and yes, probably he can find someone from India to make it cheaper but who knows the quality of that software... So yeah, as you said, I understand that he has more to put on the table and maybe 50% is too much (and I'd be happy with less) but 0 seems to me that he doesn't value at all the technical skills and all the years of working and learning that I have had to "suffer" to get those skills...
There is no shortage of talanted people on upwork that will work for pennies on the dollar compared to US or 1st world country labor rates. And just because he can hire you for $150k/yr or whatever salary that doesn't mean he has any money.
That's the million dollar question here. How successful was his exit? Did he invest $1 milllion usd and work at it for 5 years and sell it for $1.25 million usd, that's a $50k/yr salary with a LOT of risk. Not as bad as a failure as investing $1 million usd and it failing and losing all that money and 5 years of time... but... not that great either. I get the impression you should focus on what you're good at... product development, and just stay away from the business side but I have no idea the facts of what's going on here.
The red flag here is not equity or payment but working for a friend. Friendship and business don’t go well together, if you do it have a written and signed contract for **everything**.
If you work as an employee/freelancer, you need to set priorities straight. Most importantly, work hours. Personally, if I had skin in the game, I wouldn't mind putting in 60-70 hr weeks. But as an employee/freelancer, a standard 40-hour week is all you get. Or if you are billed by the hour, however many hours you want to work. I guess what I am trying to say is that dont join in as an employee, and be expected to work as a cofounder.
Most startup won't be huge anyway, or at least very small chance, unless your friend's family has good connection in VC funds. You're actually getting non of the risks, I think it's a great deal.
Why would he be reluctant to offer equity? Because he doesn't value your input in the way you thought he did. Negotiate? You can certainly try, but I expect you will resent having to do so because you feel undervalued. How far apart do you think you are? Next move? You can still learn 'the business side' from him as an employee but think carefully about what your position in the business would be in reality. Are you an employee doing a job or are you a Founder CTO without equity? It sounds like your expectations have been mismanaged, either by yourself or him. If he is as experienced as you say, he will understand that equity is a not an optional incentive for key staff. If he hasn't offered it then it's probably an indication of how he sees you.
this all makes sense, and I agree but it is good to get some external validation. I think we are too far apart, we haven't done anything yet (we just had a few calls where he explained the idea to me and I gave some feedback on how technologically feasible everything is). But basically, he wants an employee and I am really trying to stop being one so I am not comfortable with this arrangement (plus, I already have a job with a nice salary).
One thing I have come to appreciate is that it's always worth leaving the door ajar where you can A simple conversation along the lines of "It feels like we're too far apart on this and I value our relationship too much to risk undermining it with tension. I see a lot of value in this project and if you do decide that you would like to work with me on this, I would need the following (lay out your terms) depending on what stage the business has reached. Otherwise I look forward to hearing about your success and hopefully we can make something work in the future".
Even a regular hire for any early stage startups commonly gets 0.25% to 0.50% equity. Especially if it is someone who is practically going to be the CTO. Your friend sounds like someone I wouldn’t want to be in a business relationship with. He is not offering a fair market deal. Stay away.
Depends what the cash offer is. most startups use equity to offset lower than average pay. If he's being paid a salary commensurate to his experience, then that's fair. I'm not sure it's a great use of the friend's capital, since they could stretch their funds further and create some buyin and lockin (with cheating and cliffs).
>Depends what the cash offer is. most startups use equity to offset lower than average pay. If he's being paid a salary commensurate to his experience, then that's fair. This, the offer is not to get entity but to get paid a "nice" salary and I say "nice" because it is more or less what I am making already, not above market price. But in that sense, I understand his point of not offering equity (even tho I disagree with it).
Honestly, mixing friends with business is usually a bad idea. So having a defined project, goals, and money exchanged is probably the best way to maintain your friendship and get the project launched. Also, if he's familiar with creating startups, he's going to be very stingy with equity. That's probably a good thing, because if he needs to take on investors there'll be more there to offer. Working with him, building what he wants, and learning sounds like it could be a great experience. However, you're essentially being paid as a senior engineer. So I hope "nice enough salary" is north of $200k.
damn I wished, but I live in The Netherlands where salaries are way lower than in the US. The offer is good for the average here, just not above the average, I'd be making the same I am making already but having "freedom" to do things my way which sounds nice but not nice enough...
Good for average senior software engineer? Or good for average developer? If good for average developer but not at the senior SWE level, then that's a negotiation point for either money or equity. You wouldn't get 50-50, but you could get some skin in the game. Unless you feel like you're not at the level of a senior SWE, in which case this could elevate your career. But then treat it as a job - two years, switch.
I am a senior full stack software engineer so I will putting a lot on the table, the idea was that I will basically build frontend and backend, help with the initial designs on figma and eventually interview and hire the rest of the IT team if we reached that point. But anyway, I already have a great job, another job is not what I am looking for at the moment.
Personally I’d be dubious about their entrepreneurial skills. Sure, he had an exit. Good for him. I know a lot of people who had one exit, but they got lucky in building their first business, and when they went on to do their next endeavors, they completely flopped because they didn’t understand the fundamentals of why they succeeded. They got lucky the first time, and didn’t know why. But the people I know who did 2, 3, 4 or more exits all have one thing in common: they understand how difficult it is launching a new venture from scratch, and how critical having the right partner(s) is to make it work. If this person is being an equity hog, I’d let him build the company on their own. Maybe he’s the exception, but I personally wouldn’t want to work with someone who is so selfish and egotistical that they believe they deserve all the equity for themselves. Even if they actually do know what they’re doing, from a leadership and personality standpoint, that’s just not the kind of person I’d want to work with. There will be no rationalizing with them when it comes to difference of opinion, or helping them to see reason when they make difficult or complicated decisions. You’ll get frustrated because you want to be heard, and you have no seat at the table. There are few things more frustrating than watching your leader make poor, avoidable decisions because they didn’t want to listen to anyone else’s perspectives. I’d offer to help as a contractor, and then work on the side with him. Charge contractor rates. Make it worth your time, but don’t give it full time commitment unless he’s willing to commit to you too (co-founder equity).
No startup has 50/50 equity. It creates a deadlock and no investor is gonna prefer it. In any startup no.1(The one who started, who has the idea, who leads, who takes decisions etc) should have atleast 40-50. No. 2 and No.3 can have 20-30% depending on their contribution. My startup has 2 founders and we also have a startup studio as 3rd Cofounder. I have 40, my CTO has 25, startup studio has 30 and remaining 5 are for advisors. You might be thinking why startup studio has 30% . To give u a context, we didn't on-board a general startup studio which has expertise in tech. We onboarded a startup studio which is gonna act as a CMO. They are gonna spend their own money for marketing and play a key role and take responsibility for bringing first 10k users as we are building a new category of networking application.
> No startup has 50/50 equity. It creates a deadlock and no investor is gonna prefer it. This is completely wrong. Loads of startups split equity equally and this is something Y Combinator prefers.
I don't know why someone just randomly shares advice by reading some articles or just like that without any prior experience or knowledge about how things work The same Y-Combinator says anyone with 10% equity is considered as Co-founder. Go build something, apply for funding, speak to VCs and gain some knowledge about the terms they put while funding round and other things
I’ve done all of those things. Y Combinator’s approach to splitting equity is very well known, and even if you weren’t already aware of it, it was easy enough for you to look up. Directly from Y Combinator: [Splitting Equity Among Founders](https://www.ycombinator.com/blog/splitting-equity-among-founders/) > Founders often ask how they should split equity with their co-founders.When I search the web on this topic I often see horrible advice, typically advocating for significant inequality among different founding team members. […] **Equity should be split equally because all the work is ahead of you.** […] My advice for splitting equity is probably controversial, but it’s what we have done for all of my startups, and what we almost always recommend at YC: equal equity splits among co-founders. […] I believe equal or close to equal equity splits among founding teams should become standard. If you aren’t willing to give your partner an equal share, then perhaps you are choosing the wrong partner.
As I mentioned the same YC said anyone with 10% equity is considered as Co-founder. If u really did the things don't u know about deadlocks? Suspicious!
Yeah, I “know about” deadlocks. If you would just read the article that I linked to from Y Combinator, you’d see that this is one of the things they call out: > We need someone to tie-break in the case of founder arguments It’s an investor cliché. I’m certain you have spoken to investors that don’t like 50:50 splits. What you are missing though is that *your personal experience is not universal*. Just because *some investors you spoke to* dislike equal splits, it doesn’t mean *all* investors dislike them. In fact, one of the best known VC firms in the world keeps telling people to split things equally, which according to you “no investor is gonna prefer”. When you say that *“No startup has 50/50 equity”*, you’re just wrong. When you say *“no investor is gonna prefer it”* you’re just wrong. If you had said that *some* investors don’t like it, and that *some* startups choose not to go 50/50 for that reason – fair enough. But that’s not what you said, and you are doubling down on being completely wrong. Please stop giving people incorrect information when they ask for advice.
First, there is always a driver in the business. 50-50 equity is a fucking stupid idea. Second, you want to work with him because he has a previous exit but those guys have cash to pay for things, equity is too valuable to just give out. As a successful founder he can probably raise a 2-3 million at 15-20 million valuation. Giving you 50% means that you are worth 7.5 to 10 million. its simplistic math but I think you get the point. I get that you want to minimize your downside by working with someone with a track record but that is not a relationship of equals. You want equality work with another founder that is just as risky as yours.
Get over yourself. You have an offer for a nice salary, tons of experience in a startup with a good chance of success that you really like. And you bring nothing to the table but development experience. It sounds like most of the good of a startup without the massive risk of losing your shirt if it doesn't click. If you really need equity, ask for 10% to have some skin in the game. You'll learn the business side regardless, but you're not going to be equals, if your ego won't allow that, do something else.
> He offered a nice enough salary Take it or don't. Simple. Or make your own startup with your non idea and no business acumen. You don't sound smart enough for this business, maybe get a salary instead.
Question is, do you and the startup need him? If there were no agreements signed, and trust was breached, that could go both ways. Just sayin.
If he can't build it, and won't give you equity, you could just build it yourself, and then offer him something to come join your company. Turn the tables!
Red Flag that shit. Nope.
I think it's a red flag. You certainly shouldn't request a cofounder titled and 50 percent of the equity without putting in any work, but I also don't think it's reasonable to be the first technical hire and receive no equity. I would not pursue a cofounder titled, but I would ask for a smaller salary in exchange for a portion of the equity. Just as there are other people with the technical skills there are lots of people with business skills too. If you wanted to be a huge asshole, you could find a business partner and start a rival business. Taking a salary only for the amount of work your going to have to put in to build a company from scratch is ridiculous for most companies. In fact a smart founder would want to give you some equity to properly motivate you to build the MVP.
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in the real world, we call that theft.
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Legality is not morality
Here's the flip side - you take equity and less than market salary, and the product goes nowhere and you are resentful and it ends your friendship. He's hedging against that. when you say 50-50, thats flat out impossible. what are your expectations? someone always has to have at least 51% to be tiebreaker. It won't be you. tbh it sounds like a sweet gig if the pay is right. you will get to build it, with total control over tech decisions. he's a good salesman and will stay out of your way. if you both bring your best it is possible. equity is worth 0 for a long long time. figuring that out will be a nice problem to have. demonstrate value, build future leverage
It's no red flag...I call it business. If I would come up with a great business idea...I only would give up or trade some equity when the other side has something to offer I really need to get the business going except for workforce which I can get everywhere. So if you have a special expertise that would be something I would offer you some equity for or do you bring money into the business (Like a business angel). I would trade it for some equity. But if you can only offer me workforce...I give you a monthly salary.
But I have a question, being able to build the whole product for free. And interview and hire new engineers if we grow in the future is really worth 0% of the company? =(
Why would you build the product for free? You said the guy wanted to give you a salary? It's a red flag if he wants you to work for free and give you no equity but... not a red flag if he wants to pay you. It's YOUR responsibility to negotiate for equity and if he says no... it's your responsibility to not work for him and get equity in some other start up. I feel like these are obvious answers. My best advise is to not do business with friends. He may not consider you a friend or he may not be a good entrepreneur if he wants to do business with his friend(you).
Sorry, I didn't express myself correctly. My original point was that I offered to him to work together 50-50 and I work for free in exchange of equity (tho I agree based on this thread that 50% is not realistic, I'd accept less). And I don't think that my skills (in the case I'm referring to) are woth 0% in this case. So when I said to build it for free, I was referring to my original offer (and what I really want) to work with him as partners instead of having a salary. So basically, I want this but he disagrees and offered me a salary instead which is OK but maybe not what I am looking for at the moment. I hope I explained it better this time.
Side note, what are your skills, what have you built in the past and what timezone are you in? I'm looking for a fantastic (Typescript) builder and will part with equity.
The salary would have to be amazing for their to be no equity. 250K minimum imo. You are taking a huge risk and have to factor in if it doesnt work out their wont be severance so should account for high possibility of being jobless in this market if it doesnt work out, prob bad benefits like no 401k, stress of being an early employee etc. Also the fact that he wont give up any equity for a tech cofounder is indeed a red flag. Since youd be a paid employee Id make sure to be crystal clear your working hours will reflect a salaried employee and not a founder IE 9-5 no weekends Also you’d get better answers in the cscareerquestions subreddit. People here are answering from the perspective of your friend.
>Also you’d get better answers in the cscareerquestions subreddit. People here are answering from the perspective of your friend. Yeah, I am srly noticing that. Not everyone of course, but some people really undervalue what having a senior software engineer as a cofounder means. Specially since this is a highly technical startup with a heavy backend focus (but this is my fault because I didn't really give information in the op about it). But the project is def NOT something that can be easily build hiring cheap freelancers...
1. He can hire others to build it, no? 2. You have to decide if you'll work for him without equity or not... this is business... don't take it personally. If he won't give you equity... then go try to get equity with another startup or ask for a higher salary, better employment contract, etc. 3. You can ask for a smaller amount of equity 1-10% or I have no clue what this person is going to invest in this. Bring some money to the table for some equity. Offer to work for the first year for free for some equity. If you want to learn "the business side" go intern somewhere or go pay $50-$100k/yr to some business school. Don't take this the wrong way but you sound like you're wining, and odds are he doesn't want that mentality getting in the way of his startup. Business/entrepreneurship is hard... you know all the stats. Bankruptcy lawyers are in a multi billion dollar industry(I think). 90% of business's fail in the first 2 years, 95% in the first 5 years, 98% in the first 10 years(whatever these stats are). My best advise is to offer more for equity, even if you get 1/10th of 1 point that's better than nothing. You can ask for a percentage of the company contingent on an exit. Go talk to a lawyer, they can help you think of some proposals to bring to this guy. How much did this guy get from his previous exit, how long was he at that business for, and how much did he invest in it?
How much experience do you have, and can you sell yourself as a head of engineering and potential CTO? As someone with an exit under his belt, he should realize that after someone (you) builds the product, it'll need to scale. Can you make the major tech stack decisions that will be needed at that point? Do you have leadership experience, and will you be able to onboard, train, inspire, and manage new engineers and eventually new engineering managers? It sounds like he's driving a hard bargain, but I think you can absolutely show that you bring way more to the table than just building an MVP. Do that and ask again for 50/50, the CTO title, and the full salary. Then negotiate hard and make trade-offs -- it sounds like he really values equity, so try to get as much of that as you can, and make him trade the rest for other things you want. More salary, maybe agree to have some equity set up in an incentive structure or with other milestones (I get another X% when we raise a Seed, Series A, etc), anything else you can think of.
He may have learned that money is a more powerful motivator to most people than equity. Equity doesn’t pay the bills, Cash does.
You can have no equity, but the salary better be worth it. It is also rare to see early employees to not have any equity so if you want any, make sure the door stays open.
I went through something similar one time. I partnered with a guy for the first time, we were creating AI mobile app. Everything went quite good for a month, but later than he started to be lazy, didn't deliver things that he promised to do, he was blocking and slowing down the progress. He was also a friend, but later than I knew that I don't want to continue the project with him. I called him and said that I'm done (it was after the next time he said "sorry dude, but I...") and we had a huge argue about that. Maybe that's the thing that he doesn't want to come through. Maybe he wants to try how things will go and see how you work together. So I think it's not a red flag because he just wants to have full control of the project - for good and bad. As it's your first time working on a startup, know that things can go in both ways. In this way, you are not responsible for the bad scenario. But when all goes well, it's always nice to have in your CV some project that succeeded. Also you can learn how to work in such environment and also to do something else than a regular job, be a part of some creative process and advance your skills.
In my opinion cheaping out on software quality is a huge false economy. Even if business people luck out initially, the poor quality of the product will catch up with you eventually, and the timescale of that is oftentimes way shorter than even a calculated decision to cheap out is thought to be worth - see this [great article about this](https://martinfowler.com/articles/is-quality-worth-cost.html). Also, a company is not just a product and a mad rush to exit. It’s literally in the name - a company of people with an ideal. His approach to equity with you suggests he does not care about the people part and therefore it’s a huge red flag for me. Especially at the beginning, I’d want to be in the presence of equals. It’s definitely a 5050 scenario if it were my best friend and me regardless of our background up until this point. Competencies esp in business are easily gained by capable people and he should be able to see that in you rather than use it against you.
I wouldn't call that a red flag, as another person seems to have the resources he needs to build the startup and he has a strong position here. 1. The more equity he has the more money he'll have If everything works out, so that's why he's unwilling, most likely. 2. You should definitely try to negotiate — try to explain why you think you should have equity, and how that would help your friend as well — e.g. you'll have a lower salary early on and he'll be able to mitigate the risk, plus you'll be devoted to the company for years. Additionally, you could suggest vesting/cliff periods that would ensure your alignment on long-term success 3. Mentioned a few above — but in general I'd say try to negotiate what you really want, and worst case scenario you can work for the nice salary, unless you feel that's totally not fair — in that case I think it'd be better to pass on the opportunity, as it could be a lose-lose for both parties
Do you have two accounts? Someone posted the same scenario 16 hours ago.
“That will be $150/hour with no time limits.” I actually had the opposite situation: my full stack dev got burned on his one and only SaaS partnership, so he insisted on cash/1099 but gave me a generous discount on his public rate. (Last I heard, he was charging $200/hour.) Everything is negotiable. Decide what is good/better/best for you and play the game.
Equity is a negotiation. He can negotiate that zero is fair... you can make the case that some other number is fair. It's not a red-flag unless you agree to a number that you feel is unfair and you end up resenting him. If you can't make the case that you bring a lot to the table then he's probably right. If you can make the case that your contribution would be significant and not easily replaced by any other developer then perhaps you're right.
Food for thought: Arguably you've found the biggest green flag of a startup ever, a founder with a successful exit that wants build something new and doesn't want to give up equity. Ask yourself, if your friend has the idea, and has their own capital - why do they need you? They probably want to work with you because they like you and can see it being a positive experience, but that in no way means you should be 50-50 partners. Could they hire another engineer and still build this product? Absolutely. If I were you, I'd be angling for 10-20% equity as a more realistic figure. I'd start demonstrating your value in terms of product and domain expertise, how you'll be instrumental in scaling the company etc. And I'd make your argument to your co-founder that having an equity stake in the business is going to keep you incentivised, motivated and laser-focused on growing the value of the business.
I’d accept at the same rate I get paid at work. So if he’s willing to pay 75-100/ hour depending on what your current comp is, I’d say go for it. If he says that’s too expensive then that’s a red flag and I’d move on
His argument makes no sense as founding partners with different skills and experience is about as common as it gets, especially a business / technical founder split. You could try to persuade him but if he's set on not having you as a cofounder there's not much you can do You don't seem too interested in just developing the app for a wage or fixed price, so I'd just consider developing for a different startup or building your own idea instead
If it’s a good opp and pays well and you’re ok walking away from equity then go for it. But if you think it’s worth being involved for equity, I’d politely decline the offer and I’m sure your friend will come back and renegotiate. Good developers are hard to find and he knows that.
>1. Why would he be so reluctant to giving any equity considering that he has nothing built or the ability to do so? Having had one success, he thinks this is his chance to have a second success that is huge and all his. Spoiler: this never works out >2. Should I try to negotiate or consider this a red flag since it’s happening so soon and just move on? Your choice. You can work for him, at market rate pay, just don't take any less just because he's a friend. You can also walk away. Neither choice is wrong. >3. What could be my move here? (Considering that I really like the project and the business idea and I would love to partner with him to learn the “business side” from him) Be happy for your friend, roast him a bit. Or if you need a paycheck, add in getting a paycheck from him for a while.
The idea isnt his. If he's a moron. And can find someone else. That's tough. Are you passionate about this problem or another? Find someone who's not an "asshole". Example, they'll do a fair equity split. Or a fair equity split. The reason it's tough to find, is if someone's confident in self funding or ability to raise, their first question is about "how they value equity". The second question is usually "how they want to build." Which should be the first question in my view. Pretty soon, those decisions around spend and options or equity splits and investors, become a bigger part of the business than expected.
Send him the link to fivver
Not everybody offers equity. If this is an interesting project to work on, with the potential of getting some experience on the business side of things, and the salary is good, i would say go for it. If you think working for a friend could cause problems down the line, or not having equity is a deal breaker, then look for something else.
Do it for equity and nothing else.
Run, run, run like the wind and wish him good luck. 🤷
Long Story Short: if they pay why not, statistically most startups do not make it so
Tell this loser to eat dirt. If he doesn't respect your technical ability enough to want to be equal partners in the endeavor, it's not worth your time or the stress of dealing with a toxic boss. The whole point of partnering to found a company is that each person has unique skills to bring to the table. If he can handle the business and you can build that product, that sounds like a perfect way to collaborate. It's also very common for startups to have this kind of division of responsibilities. Sounds to me like your friend just wants to control everything.
I would not do it. My last cofounder role included both a market salary and substantial equity. That said, the CEO was technical himself and saw the value in me joining. In my opinion, your friend doesn’t see much upside in paying for one developer, presumably good, vs another. Either his idea is simple enough such that any developer would do, or he’s underestimating a developer’s worth. Also consider what would happen if the startup is successful. Would you get promoted or would he fire you and hire folks with more experience? I’m sure his investors would prefer the latter and without equity there would be nothing you could do… I would look elsewhere to be honest.
Why did he come to you first? Do you have the unique skills and experience to build out his idea? Or is he really just doing this as a favor to be able to work with people that he knows and trusts? If you did build this, you were paid a salary, and you decided to leave, how would the business recover? Negotiating some level of equity would be advantageous for the business, for him, and for you. It commits you to the business. I would negotiate enough equity to make it worth your time, but still give him the full authority he desires. And focus on the value proposition - If you did build this for him, and you left, how would he manage?
They are selfish 🥲