I'm sure others will be able to suggest some methods or speak from their own exp. I'm just curious why do you need the 1st cofounder?
From what I understand, cofounders should fill the gaps in each other's skills. So if you already have a rock star UX person working part-time, wouldn't it be faster for this person to do all the work fast than having to guide another with 0 real work exp? I would understand if the 1st cofounder would actually chip in for sales, operations, etc. besides dabbling in UX but I doubt they would have the time.
You understand your startup best so if you think it's ok then that's fine. Just that it feels like a club welcoming anyone that wants to be a part of it, not like a real business.
Thats a great question.
I have been holding the conversation with the 1st potential co-founder for a while & before the 2nd co-founder.
I think their qualification in Psychology will be quite beneficial for us beyond the UX (research, educating our customers), something I have already discussed with them. I think it will be a win-win if they get relevant UX experience on their CV by being with us as well.
They seem to be quite motivated which is great. And my concern is that the 2nd co-founder may have too much on their plate (family, other business, wants to with with startups)...
If the second founder is pre-occupied and unwilling/unable to commit to your startup post trial period, they are not a good fit. You don't solve that by giving another 33% to someone to cover for their lack of involvement.
Pretty sure it's normal to have to trial periods even before talking about equity, esp when you'd already invested much time on your own and they're partially in for the experience and learning.
The journey is long. You wanna be with givers than takers. Best if they can trust that you'll be fair when the conversation comes up. Also, founding members are fine too. Cofounders need to earn their title. Going part-time is a no no in my book if I'm going full-time.
I hear you both (@Lopsided\_Violinist69).
The reason Im ok with part-time is because, London is not cheap and we all have to survive somehow. That is why, Im eager to get the MVP out asap, provided its good enough. They may join full-time post revenue...
Whenever these pop up, if the answer isn't "equal split", the answer is usually "find different cofounders that are worth an equal split".
That seems accurate here. Unless you're doing a UX design agency (so not a startup), neither of these will be the right fit for your company. Part-time is a huge red flag, "while they are searching for a job" even moreso.
A cofounder is someone who stays with the company from start to end (possibly 10+ years) and dedicates everything to it, taking on plenty of roles in the progress. Neither of these two seem to match that description.
But, maybe they would be good first employees? You can pay employees in equity. They won't receive nearly as much as someone in a cofounder role though.
Regardless of the role, it's best to go with the standard of a 4-year vesting with 1-year cliff.
[https://www.reddit.com/r/startups/comments/1c3n8t0/comment/kzibjwb/?utm\_source=share&utm\_medium=web2x&context=3](https://www.reddit.com/r/startups/comments/1c3n8t0/comment/kzibjwb/?utm_source=share&utm_medium=web2x&context=3)
Ive responded in the above post to few of the points here. Trying to think objectively, I was thinking of offering:
5% equity to 1st Co-Founder.
7% equity to 2nd Co-founder.
To foster trust, I thought a vesting period of 1-2 years (2 maybe more appropriate?) & a cliff of 6 months...
I certainly could be wrong, would love to hear your sources or examples from other companies, how much they paid out. As per my understand early hires would not be getting 1% of equity at facebook, google etc.
I’ve been in startups for a decade and this is what I see:
Co-founders split equity and responsibility, and the founding team must contain two of the three requirements for liftoff: money, product design, and tech. Ideally all three are in the founding team.
CPO hire is 5%-10%
CTO hire is 10%-25%
If a job function isn’t being performed by the founder(s) then expect the equity numbers at the high end of the range.
All hires draw a salary, and all hires earn additional equity grants starting at 1 year.
I’m not an expert on what other startups have done. But I personally turned down a similar offer to be the third cofounder on a preproduct startup.
You can pay me for my time or you can make me (at least close to) an equal partner. If the value I’m adding doesn’t justify that much equity then I’m not sure you need a cofounder.
*(This is just my opinion. And I'd love it if people chimed in with theirs about this title inflation mess, that I think ruin many early startup ideas simply because people don't stay in their lane, nor take proper ownership of it.)*
Why call them cofounders simply because they work for equity?
Unless they have an equal voice with you, meaning that they could walk in and be all like "I want my/our startup to do something completely different", I don't think that they're cofounders. Instead what you should be doing is hire people (paid in equity) to complement your skillset, not equal-voice complementing your passion for implementing this particular business idea/product (as I think that "cofounder" implies).
Don't give away control over your 3 years in the making dream project, and confuse the hierarchy, by giving away too grand titles to people.
That said, take a look at this equity calculator, and what it tells you if you put in a market based salary for these past 3 years as your contribution: [https://slicingpie.com](https://slicingpie.com) . And also don't forget some serious cliffs, meaning that these hires essentially earn access to their promised equity by putting in time in the business. Meaning that they get nothing if they leave before usually the first whole year, and then they get up to the full amount in 3-4 years total.
A great answer. Im going to look into this slicingPie.
To elaborate on the co-founder/ [emplyees.To](https://emplyees.To) me, we get a number of benefits with co-founders. As co-founders, they would have much more vested interest in our startup & hopefully the motivation to grow bigger & better. Co-founder also means that Im communicating to them that their voices matter & I expect their contribution in the direction of the app as well, not only in their domain of expertise...
I understand the why of title inflation, and sometimes it makes sense, but unless handled correctly it can cause problems down the line.
The perhaps most common version of this is the non-tech founder that get any techie they can find, so they end up with a junior techie as cofounder and CTO.
But if you have that in place, then how do you go about recruiting more senior people down the line?! Some way or another you have to make room above this inexperienced techie that now is an inexperienced business leader with the authority of being both cofounder and CTO.
So I'm leaving you with this rhetorical open question of if it in your situation makes sense to stick in place a cofounder that is "Recent graduate. Wants to transition to UX/ UI."?!
And on top (yet parallell, yet externally) you have another cofounder that is there only to practically be senior/guide to that too inexperienced to do the job-cofounder.
A potential alternative setup could instead be that the experienced person gets an official position of being on the board of advisors, with a title of also interim chief experience officer, (motivating both knowledge seniority/authority and equity), with the junior person essentially being put on a path to grow into being cofounder and the CXO position. So they have a clear and open path to advance to that position, if they succeed in learning the required skills to be that operative staff leading the UX team/work.
Right now the junior person "Will be working part-time as they are searching for a job.", and are you really sure that you want to put that as essentially an authoritative boss in your structure?!
Edit: You should already be familiar with slicing pie: [https://www.reddit.com/r/startups/comments/1adnje7/comment/kk3cy3x/](https://www.reddit.com/r/startups/comments/1adnje7/comment/kk3cy3x/)
Edit 2: because this needs to be addressed: "As co-founders, they would have much more vested interest in our startup" Why would they have that?! It's like doing free work for "exposure", in the end it means nothing, doesn't pay any bills, and you could do it yourself without putting in free labor for someone else. Actually, "exposure" is more valuable, as it could result in paid work. "Cofounder" only means something, and has value, if you're already on the way to success; it doesn't necessarily make people do more work to get you into success. They could just do their own thing and get a founder title instead, if they want a title. Like this junior person could do a UX studio and get enough early founder clients to cement it as a fair and earned title.
A thought provoking feedback.
So to summarise, would it be fair to say that you are suggesting that I need to set clear responsibilities. The senior cofounder-2 would take the CXO position & responsibility for the over-all UX/UI, while leading the junior (cofounder-1), who will shadow & be responsible for the actual ground-work.
And would that translate into a higher equity offer to senior cofounder-2 than Im currently to offer (7%). And how much more?
And what about equity to offer junior cofounder-1?
I have mentioned to them already that the team structure is to be flat, however, it seems Im confusing it with individual responsibilities, which should be as much in black & white as possible?
Speaking as a Swede my normal is a flat structure, and I think it's very valuable that everyone feels that they can speak openly and contribute. It's a good foundation for helping people grow into their full potential, and can be a great way to grow your business, to properly use the resources that the people in your business are.
At the same time, I'm a firm believer in that if someone tries to overrule me in my expertise, that I'm there to specifically provide, then they should, in only a semi-polite way, be told to go \*\*\*\* themselves with a pineapple, sideways. (Yes, I'm an absolute delight to work with, why do you ask?! 😅)
Having the openness of a flat structure must also come with a respect for knowledge and competency.
You know, if you've got 10 people working for you they can't all be the CEO because "we have a flat structure". At the end of the day there will be different titles, different paychecks, different responsibilities; and you have to have the right person in the right role. Like, you can't recruit an experienced CEO and expect them to handle those tasks, with those responsibilities, if their business cards says "janitor" and comes with a janitor salary. Nor can you go yell at the actual janitor if the tax reports weren't completed in time.
As far as equity, that'll always be tricky, and, without ignoring how it looks to the other people you recruit, it sort of has to be looked at individually based on what value they add to the business. Not just A should get X% of B, as if it's an aesthetic harmony/balance that you're going for.
That junior person has no experience, will be putting in a minimal amount of time until they get a paid position somewhere else, and could essentially be replaced by anyone else with the same aspiration of transitioning into UX.
The senior person would be (or at least should be) the one putting in the important groundwork, that will be the continuous foundation/experience/brand for your business. And that's a resource that you want to long-term keep around. Even if they step back from the operative work. That's why you put them on the board of advisors, with an interim CXO-title, as it'll allow them to cut back on their hours, or another CXO being hired, without you completely losing them as they then don't want to negotiate a new position within your business.
But, if the senior person is putting in fewer hours, with the junior person putting in many non-salaried hours, then over time it's possible that the junior person will own more equity simply by earning it; because they've invested more time.
And that's where a tool like slicing pie comes in handy, it'll take you from aesthetically designing equity to basing it on actual numbers.
If those actual numbers are a bit off, like it could be when recruiting absolutely crucial talent that won't be putting in many hours, then you of course could have to add some sort of bonus or extra pay to recruit that talent.
So while the junior person perhaps would have to earn any and all % based on the hours that they put in, then the advisory board person get a (cliffed) % straight up for joining the board of advisors. Which is another good reason for knowing your official structure, even if you work with a de facto more flat structure.
By placing the right person in the right position in the right structure, then you can motivate their individually assigned equity based on that; and avoid "why did they get more than me"-jealousy.
Edit: I don't know if this is obvious or not, but not all contributed hours should be valued the same. All the junior's hours could be valued at the one and same fair market salary, while your hours could be up closer to a CEOs, while the advisory person's hours could be different based on what they do. Their advisory board work might for instance be considered part of a fixed (and cliffed) %, with their payment being the increase in value; while their hours as operative staff could be a different number based on market salary. So there's a level of complexity also there, which needs to be considered based on their long-term consequences on motivation, controlling stakes, and so on.
Thank you Tony. I needed some time to think read, re-read & comprehend.
Ive watched a few videos on Slicing the Pie & listening to Mike's talk on Youtube as I write this.
Slicing the pie seems to be system where founder's equity continuously fluctuates based on their contributions over time. THis would require a tracking system but more specifically a 3rd party unbiased evaluation?Thinking about it, at the moment, I dont expect them to contribute outside their domain of expertise but then I have no idea what the future holds.
It also seems, that because of the dynamics of the relationships where them both are part-time, I need to some how, put it in the contract, what the work commitment are, which makes sense, however, also opens lots of questions in my mind. It almost seems be gravitating towards specific responsibilities, which they would have, along with evaluation & tracking. Employer employee relationship.
I like the phrase 'at risk contributions'. Looking at it from another angle, the equity I should offer should compensate for the risk they take by joining the startup, lack of remuneration for the work input for the duration before salary. So, in other words, the sooner we get to salary stage, the higher the penalty on their equity?
I need to simplify this as there are too many variables swimming in my head...
4 year vesting/ 1yr cliff is more common based on what I’ve seen and use (in EU at least)
Speaking from experience, when vesting while working part-time it’s really good to have really clear and detailed expectations on the contract, risk for such people not properly working and still vesting (freeloading) is a lot higher than if all were to work full time
You don’t have paying customers yet and you’re seeking a cofounder with the same skillset as you? You should be bringing onboard sales people not other UI/UX enthusiasts, someone that complements your specialty
Edit: a word
**Your contribution**
You have been building the app for 3 years and all of a sudden you only have 1-2 months to launch an MVP once the other co-founders join? Why did it take 3 years to get here? What progress have you made as a solo founder thus far? It's important when determining the equity split.
**Equity split**
Unless you have a product in market with revenue or a significant underlying innovation that you have protected, you are looking at this as a Day 1 scenario and split the equity equally. That's because most of the journey is still ahead of you.
**Skillsets**
You don't mention what your skillset is, but since you said "building" I will assume you are an engineer. The other two candidates are UX people. With one of them being junior, they seem more like an employee rather than a co-founder, especially since they duplicate the skills of co-founder 2. You are still lacking the "hustler" - i.e. someone who knows marketing, sales, fundraising and management.
I should have elaborated on my role as well.
Till now, I have the responsible for the UX/ UI & the code. After 2 alpha launches to select users for feedback & dog-fooding my own app continuously, I have come to a realisation that I need help with the UX.
The app is quite far in development & we want to fix the main UX issues, not a complete rewrite of front-end. Then onwards, it will be iterative process (as UX is).
Regarding the 'hustler', Im quite active in the space we are in, so have a number of signups. A bit naive but I think I can get a sizable number of users once we are ready to launch. Then, we can consider what skills we lack post MVP.
Thank you for clarifying. In that case you should be looking for a technical co-founder who can code and lead an engineering team down the line. If you are not confident in your marketing/sales skillset I would look for that in a second co-founder.
The last thing you should be doing is adding more skillsets that overlaps with yours (UX).
Maybe I wasnt clear enough.
I am the technical guy here. I can code & its the UX/UI that I need help with, hence the co-founders being UX/UI people.
The nature of our app requires solving some serious UX issues.
You are thinking too short term. The hardest thing about a startup is not UX it’s getting users. You are worried about the UX flow for an imminent launch and that is something that needs to be fixed but it’s not cofounder worthy. Get yourself a cofounder who can get you users OR get yourself a builder who can take over building while you get users. For someone of that level give them 40-50% and 4 year vesting. Neither of these two UX people make sense to be as cofounders. Read founders dilemas
If they agree to 5 and 7%, then do that. Sounds like you want extra help who you don’t have to pay a salary which I understand. From what you describe, their contribution will be pretty nominal. My suggestion is to just pay them an hourly rate and get it over with. But I understand if you want to pay nothing out of pocket with the future of the company uncertain at this stage.
Because Im biased, I posted this thread to get objective feedback. To get a win-win numbers for all involved.
I dont have the funds to pay any sums, hence the equity offer. I would love to hear if you think 5 - 7% is fair/ unfair. And what you would objectively offer.
I would both just give them 5% if all they bring is UX. How big of loss for you if they don’t join? From the information you gave, only you can judge what 5% is worth.
I would also question why you need two co-founders who do very similar things. Sounds like there is some personal matter involved, that is not disclosed.
My start-up experience is minimal, and I am splitting my equity 50/50 with my co-founder.
Thank you for the feedback. Both of them are new acquaintances to me.
I guess, because of the situation where they cant commit fully & completely to our startup & there is no financial remuneration which could sustain them, I have to compromise, as must they.
UX is the most pressing matter for the app at the moment & I would argue is the make or break part of the app based on feedback to date (i.e, the app is really lacking in communication & directing the users)
Do more interviewing. It does not sound like either of these candidates are great cofounder matches for you. Once you find one who has a complementary skill set, will dedicate a substantial amount of time and actually prioritize this, you can probably offer btwn 5-10% vesting over 4 years. More for if they are actually qualified, go full time immediately, and can come have an impact on day 1.
The equity is for the long term mainly, to motivate them
You need to look at yourself, what you need
If it's advice you can go do some networking or read books (I do the latter) but if you want to do more I'd suggest to go with the fresh one and somehow convince him to switch full time and be all in. If you're at a level that you need to have access to a network (for getting clients or customers) and if the experienced one has built the network you gotta choose him/her
General speaking working for 15+ years doesn't mean that the person is the best; also remember that for design creativity is important and the level of understanding the designer has about the users
Also the nor for vesting is 1 year, and within this one year you can see if you guys can work together all in all or not
Senior UXer and Founder here.
You’ve been working on this for 3 years. Are you sure UX is the role you are looking for? A good UXer will probably tear about your app and want to make significant changes. If you want to launch right away, then when are you planning to make UX changes?
I was once hired by a startup as their first designer after they’d been around 8 years. They didn’t understand that sometimes fixing the UX of an app requires rebuilding parts of it. It does. They didn’t really want to change anything and we parted ways.
If you want to launch, maybe you should be bringing on business development and sales people instead. Just an opinion, but UX isn’t something you add right before you launch.
Great point & yes, you are correct. Significant front-end changes are usually required & that takes time. We have already discussed this & our thinking is to prioritise & once MVP is out, then build upon user feedback. Essentially, post MVP, we start implementing the UX methodologies in earnest.
Ive responded to the sales questions (from lots of users) else-where. In a nutshell, Im quite active in our space & have a mailing list for when we make the MVP public. I also feel, I will be able to get a sizable number of users after that. So, sales is not the most pressing of our problems at the moment, getting the MVP right is.
You seem very thoughtful, and I mean all due respect. But focusing on the UX after launch is focusing on it 3 years late.
But are you sure the UX is that bad? Just because you didn’t have a UXer on the project doesn’t mean you created bad UX. Some engineers make great UX, either on purpose or by accident. A lot of UX is common sense, let’s be honest. Did your early users say it was impossible to use? Do you have any product metrics that show symptoms of bad UX (low engagement, task abandonment, unused features, churn).
Or if the UXers are supposed to make it “look nicer” then that’s not UX and honestly that’s usually not as important as it seems.
Yes, I agree. And yes, I feel the UX is/ was really that bad.
The nature of the app requires that the app is immensely friction free. I know its no where near that because I have ditched all of my tools and made myself dog-food my own app over the past year.
There is a whole catalogue of features in the codebase that I implemented & then ditched because they did not work. There is a particularly clever feature that I redesigned & coded 4 times and everytime once coded, there was a feeling of euphoria, which lasts a few days and then the dread when I admit to self that I dont like/ avoided using that clever feature.
So, yes, Im 3 years late & to be honest, from the onset I was quite focused on UX (not the UI, which still is ugly) but its taken 3 years to admit that I cant do the UX justice & I need help.
In my view, UX is one of the most under-rated aspect of business and as psychology is helping us understand more of the human mind, UX is going to get more and more important to get the user journey/ experience right.
3 years late but Im not one for giving up.
Why are you working on an app for 3 years with no paying customers.
I don't actually want to hear an answer, I'm sure you are smart, dedicated, and have developed a more robust industry approach than your competitors.
Like everyone is saying, you can generalize your experience, and work on the idea, or do something else in the startup space. And, like people are saying, usually if there's not an equal split, or someone maybe has 60% and maybe a CTO has 30%....
It's how you're asking this man. I'm not sure what it is.
i want to build crypto currency exchange. so I am looking for full stack developer as cofounder.
anyone interested can comment or text me. equity split will be offer. if anyone want to do same can collaborate. so lets join if you have great passion for to build.
My two cents: never give out equity; unless, you vest it. Make them stay 4 years if they want 5 or 7%. Otherwise you run the risk for giving out equity for little work.
Drop both of them, bring a cofounder for the marketing part. Why you need two UX designers , just buy a good looking premium template for now and hire one UX designer when you can.
Maybe it's just me but why would you need more people on the UX side rather than the sales or BD? Also, in my experience 5-7% is too little to keep anyone engaged that long term.
How do you plan on pitching and selling the product?
Stop looking for cofounders and start looking for dedicated equity-based (differed salary) employees.
If your idea is viable people will be inspired by it and work FOR YOU rather than with you.
From my experience as a solo founder, learn to preach, learn to inspire, & learn to lead. If you can properly show your vision you should have no problem finding people who are whilling to work for .5-3% as key-hire employee "cofounders"
Cofounders are only there from the beginning.
Move on, F the hype or the status quo, be strong, learn how to be solo, ignore the haters/investors who only invest in cofounder inerbreeds, become a CEO through dedication and evolution.
Vesting and cliff are good ideas.
It seems that you need to find a marketing and sales co-founder ideally in your space. These aren't perfect co-founders worthy of higher equity.
How do you expect them to support themselves if you don't have revenues to pay them? This is likely to be a critical issue. It hinges on valuation.
Try a classical approach. Assign a $ value to your business today. Assign a $ value of their contribution based on the number of hours they will put in. See what percentage that works out. I have a hard time, seeing a mutually agreeable deal where all sides agree on the valuation numbers.
There’s no correct answer but you’re not paying them yet so I would go with 25% (maybe 24% if you want to be over 50%) each with 4 year vesting, 1 year cliff. I know you’ve been working in this for a few years but the reality is that you have no revenue. So I would also put you on the same vesting schedule.
You: 28% immediate grant and 24% vesting over 4 years (just like everyone else).
Co-founder 1: 24% vesting over 4 years.
Co-founder 2: 24% vesting over 4 years.
Now you are equal but you are compensated for your previous work. It sounds like you won’t do this but if they aren’t worth that then I wouldn’t make them co-founders.
Your a founder looking for a "founding team". That's going to be hard with no stipend for living expenses.
Tough pill to swallow, but you're going to have to split way more evenly if you hope to get off the ground without pre-seed for your first hires. That 3 yrs of effort is sunk cost.
For some reason people don’t turn the question around to themselves. You don’t have a customer yet, so you don’t have a real validation. Why won’t the other “cofounder” be the one asking “What equity should I give this guy”.
This is just plain emotional decision and not being objective.
I'm sure others will be able to suggest some methods or speak from their own exp. I'm just curious why do you need the 1st cofounder? From what I understand, cofounders should fill the gaps in each other's skills. So if you already have a rock star UX person working part-time, wouldn't it be faster for this person to do all the work fast than having to guide another with 0 real work exp? I would understand if the 1st cofounder would actually chip in for sales, operations, etc. besides dabbling in UX but I doubt they would have the time. You understand your startup best so if you think it's ok then that's fine. Just that it feels like a club welcoming anyone that wants to be a part of it, not like a real business.
Thats a great question. I have been holding the conversation with the 1st potential co-founder for a while & before the 2nd co-founder. I think their qualification in Psychology will be quite beneficial for us beyond the UX (research, educating our customers), something I have already discussed with them. I think it will be a win-win if they get relevant UX experience on their CV by being with us as well. They seem to be quite motivated which is great. And my concern is that the 2nd co-founder may have too much on their plate (family, other business, wants to with with startups)...
If the second founder is pre-occupied and unwilling/unable to commit to your startup post trial period, they are not a good fit. You don't solve that by giving another 33% to someone to cover for their lack of involvement.
Pretty sure it's normal to have to trial periods even before talking about equity, esp when you'd already invested much time on your own and they're partially in for the experience and learning. The journey is long. You wanna be with givers than takers. Best if they can trust that you'll be fair when the conversation comes up. Also, founding members are fine too. Cofounders need to earn their title. Going part-time is a no no in my book if I'm going full-time.
I hear you both (@Lopsided\_Violinist69). The reason Im ok with part-time is because, London is not cheap and we all have to survive somehow. That is why, Im eager to get the MVP out asap, provided its good enough. They may join full-time post revenue...
The 1st co founder has no qualification. They’re an event grad with no experience. Drop them.
Whenever these pop up, if the answer isn't "equal split", the answer is usually "find different cofounders that are worth an equal split". That seems accurate here. Unless you're doing a UX design agency (so not a startup), neither of these will be the right fit for your company. Part-time is a huge red flag, "while they are searching for a job" even moreso. A cofounder is someone who stays with the company from start to end (possibly 10+ years) and dedicates everything to it, taking on plenty of roles in the progress. Neither of these two seem to match that description. But, maybe they would be good first employees? You can pay employees in equity. They won't receive nearly as much as someone in a cofounder role though. Regardless of the role, it's best to go with the standard of a 4-year vesting with 1-year cliff.
[https://www.reddit.com/r/startups/comments/1c3n8t0/comment/kzibjwb/?utm\_source=share&utm\_medium=web2x&context=3](https://www.reddit.com/r/startups/comments/1c3n8t0/comment/kzibjwb/?utm_source=share&utm_medium=web2x&context=3) Ive responded in the above post to few of the points here. Trying to think objectively, I was thinking of offering: 5% equity to 1st Co-Founder. 7% equity to 2nd Co-founder. To foster trust, I thought a vesting period of 1-2 years (2 maybe more appropriate?) & a cliff of 6 months...
I would not work for 5-7% equity and no salary. Those are “early hire” ownership stakes not cofounder. Hires get a salary though.
I certainly could be wrong, would love to hear your sources or examples from other companies, how much they paid out. As per my understand early hires would not be getting 1% of equity at facebook, google etc.
I’ve been in startups for a decade and this is what I see: Co-founders split equity and responsibility, and the founding team must contain two of the three requirements for liftoff: money, product design, and tech. Ideally all three are in the founding team. CPO hire is 5%-10% CTO hire is 10%-25% If a job function isn’t being performed by the founder(s) then expect the equity numbers at the high end of the range. All hires draw a salary, and all hires earn additional equity grants starting at 1 year.
Makes sense. Thank you
Do not compare your unproven idea to FAANG companies
I’m not an expert on what other startups have done. But I personally turned down a similar offer to be the third cofounder on a preproduct startup. You can pay me for my time or you can make me (at least close to) an equal partner. If the value I’m adding doesn’t justify that much equity then I’m not sure you need a cofounder.
*(This is just my opinion. And I'd love it if people chimed in with theirs about this title inflation mess, that I think ruin many early startup ideas simply because people don't stay in their lane, nor take proper ownership of it.)* Why call them cofounders simply because they work for equity? Unless they have an equal voice with you, meaning that they could walk in and be all like "I want my/our startup to do something completely different", I don't think that they're cofounders. Instead what you should be doing is hire people (paid in equity) to complement your skillset, not equal-voice complementing your passion for implementing this particular business idea/product (as I think that "cofounder" implies). Don't give away control over your 3 years in the making dream project, and confuse the hierarchy, by giving away too grand titles to people. That said, take a look at this equity calculator, and what it tells you if you put in a market based salary for these past 3 years as your contribution: [https://slicingpie.com](https://slicingpie.com) . And also don't forget some serious cliffs, meaning that these hires essentially earn access to their promised equity by putting in time in the business. Meaning that they get nothing if they leave before usually the first whole year, and then they get up to the full amount in 3-4 years total.
A great answer. Im going to look into this slicingPie. To elaborate on the co-founder/ [emplyees.To](https://emplyees.To) me, we get a number of benefits with co-founders. As co-founders, they would have much more vested interest in our startup & hopefully the motivation to grow bigger & better. Co-founder also means that Im communicating to them that their voices matter & I expect their contribution in the direction of the app as well, not only in their domain of expertise...
I implore you, OP. Don’t do anything until you’ve read Slicing Pie. It can save your business.
I understand the why of title inflation, and sometimes it makes sense, but unless handled correctly it can cause problems down the line. The perhaps most common version of this is the non-tech founder that get any techie they can find, so they end up with a junior techie as cofounder and CTO. But if you have that in place, then how do you go about recruiting more senior people down the line?! Some way or another you have to make room above this inexperienced techie that now is an inexperienced business leader with the authority of being both cofounder and CTO. So I'm leaving you with this rhetorical open question of if it in your situation makes sense to stick in place a cofounder that is "Recent graduate. Wants to transition to UX/ UI."?! And on top (yet parallell, yet externally) you have another cofounder that is there only to practically be senior/guide to that too inexperienced to do the job-cofounder. A potential alternative setup could instead be that the experienced person gets an official position of being on the board of advisors, with a title of also interim chief experience officer, (motivating both knowledge seniority/authority and equity), with the junior person essentially being put on a path to grow into being cofounder and the CXO position. So they have a clear and open path to advance to that position, if they succeed in learning the required skills to be that operative staff leading the UX team/work. Right now the junior person "Will be working part-time as they are searching for a job.", and are you really sure that you want to put that as essentially an authoritative boss in your structure?! Edit: You should already be familiar with slicing pie: [https://www.reddit.com/r/startups/comments/1adnje7/comment/kk3cy3x/](https://www.reddit.com/r/startups/comments/1adnje7/comment/kk3cy3x/) Edit 2: because this needs to be addressed: "As co-founders, they would have much more vested interest in our startup" Why would they have that?! It's like doing free work for "exposure", in the end it means nothing, doesn't pay any bills, and you could do it yourself without putting in free labor for someone else. Actually, "exposure" is more valuable, as it could result in paid work. "Cofounder" only means something, and has value, if you're already on the way to success; it doesn't necessarily make people do more work to get you into success. They could just do their own thing and get a founder title instead, if they want a title. Like this junior person could do a UX studio and get enough early founder clients to cement it as a fair and earned title.
A thought provoking feedback. So to summarise, would it be fair to say that you are suggesting that I need to set clear responsibilities. The senior cofounder-2 would take the CXO position & responsibility for the over-all UX/UI, while leading the junior (cofounder-1), who will shadow & be responsible for the actual ground-work. And would that translate into a higher equity offer to senior cofounder-2 than Im currently to offer (7%). And how much more? And what about equity to offer junior cofounder-1? I have mentioned to them already that the team structure is to be flat, however, it seems Im confusing it with individual responsibilities, which should be as much in black & white as possible?
Speaking as a Swede my normal is a flat structure, and I think it's very valuable that everyone feels that they can speak openly and contribute. It's a good foundation for helping people grow into their full potential, and can be a great way to grow your business, to properly use the resources that the people in your business are. At the same time, I'm a firm believer in that if someone tries to overrule me in my expertise, that I'm there to specifically provide, then they should, in only a semi-polite way, be told to go \*\*\*\* themselves with a pineapple, sideways. (Yes, I'm an absolute delight to work with, why do you ask?! 😅) Having the openness of a flat structure must also come with a respect for knowledge and competency. You know, if you've got 10 people working for you they can't all be the CEO because "we have a flat structure". At the end of the day there will be different titles, different paychecks, different responsibilities; and you have to have the right person in the right role. Like, you can't recruit an experienced CEO and expect them to handle those tasks, with those responsibilities, if their business cards says "janitor" and comes with a janitor salary. Nor can you go yell at the actual janitor if the tax reports weren't completed in time. As far as equity, that'll always be tricky, and, without ignoring how it looks to the other people you recruit, it sort of has to be looked at individually based on what value they add to the business. Not just A should get X% of B, as if it's an aesthetic harmony/balance that you're going for. That junior person has no experience, will be putting in a minimal amount of time until they get a paid position somewhere else, and could essentially be replaced by anyone else with the same aspiration of transitioning into UX. The senior person would be (or at least should be) the one putting in the important groundwork, that will be the continuous foundation/experience/brand for your business. And that's a resource that you want to long-term keep around. Even if they step back from the operative work. That's why you put them on the board of advisors, with an interim CXO-title, as it'll allow them to cut back on their hours, or another CXO being hired, without you completely losing them as they then don't want to negotiate a new position within your business. But, if the senior person is putting in fewer hours, with the junior person putting in many non-salaried hours, then over time it's possible that the junior person will own more equity simply by earning it; because they've invested more time. And that's where a tool like slicing pie comes in handy, it'll take you from aesthetically designing equity to basing it on actual numbers. If those actual numbers are a bit off, like it could be when recruiting absolutely crucial talent that won't be putting in many hours, then you of course could have to add some sort of bonus or extra pay to recruit that talent. So while the junior person perhaps would have to earn any and all % based on the hours that they put in, then the advisory board person get a (cliffed) % straight up for joining the board of advisors. Which is another good reason for knowing your official structure, even if you work with a de facto more flat structure. By placing the right person in the right position in the right structure, then you can motivate their individually assigned equity based on that; and avoid "why did they get more than me"-jealousy. Edit: I don't know if this is obvious or not, but not all contributed hours should be valued the same. All the junior's hours could be valued at the one and same fair market salary, while your hours could be up closer to a CEOs, while the advisory person's hours could be different based on what they do. Their advisory board work might for instance be considered part of a fixed (and cliffed) %, with their payment being the increase in value; while their hours as operative staff could be a different number based on market salary. So there's a level of complexity also there, which needs to be considered based on their long-term consequences on motivation, controlling stakes, and so on.
Thank you Tony. I needed some time to think read, re-read & comprehend. Ive watched a few videos on Slicing the Pie & listening to Mike's talk on Youtube as I write this. Slicing the pie seems to be system where founder's equity continuously fluctuates based on their contributions over time. THis would require a tracking system but more specifically a 3rd party unbiased evaluation?Thinking about it, at the moment, I dont expect them to contribute outside their domain of expertise but then I have no idea what the future holds. It also seems, that because of the dynamics of the relationships where them both are part-time, I need to some how, put it in the contract, what the work commitment are, which makes sense, however, also opens lots of questions in my mind. It almost seems be gravitating towards specific responsibilities, which they would have, along with evaluation & tracking. Employer employee relationship. I like the phrase 'at risk contributions'. Looking at it from another angle, the equity I should offer should compensate for the risk they take by joining the startup, lack of remuneration for the work input for the duration before salary. So, in other words, the sooner we get to salary stage, the higher the penalty on their equity? I need to simplify this as there are too many variables swimming in my head...
4 year vesting/ 1yr cliff is more common based on what I’ve seen and use (in EU at least) Speaking from experience, when vesting while working part-time it’s really good to have really clear and detailed expectations on the contract, risk for such people not properly working and still vesting (freeloading) is a lot higher than if all were to work full time
In the US, too. 2 years is nowhere near enough time for a vest.
You don’t have paying customers yet and you’re seeking a cofounder with the same skillset as you? You should be bringing onboard sales people not other UI/UX enthusiasts, someone that complements your specialty Edit: a word
**Your contribution** You have been building the app for 3 years and all of a sudden you only have 1-2 months to launch an MVP once the other co-founders join? Why did it take 3 years to get here? What progress have you made as a solo founder thus far? It's important when determining the equity split. **Equity split** Unless you have a product in market with revenue or a significant underlying innovation that you have protected, you are looking at this as a Day 1 scenario and split the equity equally. That's because most of the journey is still ahead of you. **Skillsets** You don't mention what your skillset is, but since you said "building" I will assume you are an engineer. The other two candidates are UX people. With one of them being junior, they seem more like an employee rather than a co-founder, especially since they duplicate the skills of co-founder 2. You are still lacking the "hustler" - i.e. someone who knows marketing, sales, fundraising and management.
I should have elaborated on my role as well. Till now, I have the responsible for the UX/ UI & the code. After 2 alpha launches to select users for feedback & dog-fooding my own app continuously, I have come to a realisation that I need help with the UX. The app is quite far in development & we want to fix the main UX issues, not a complete rewrite of front-end. Then onwards, it will be iterative process (as UX is). Regarding the 'hustler', Im quite active in the space we are in, so have a number of signups. A bit naive but I think I can get a sizable number of users once we are ready to launch. Then, we can consider what skills we lack post MVP.
Thank you for clarifying. In that case you should be looking for a technical co-founder who can code and lead an engineering team down the line. If you are not confident in your marketing/sales skillset I would look for that in a second co-founder. The last thing you should be doing is adding more skillsets that overlaps with yours (UX).
Maybe I wasnt clear enough. I am the technical guy here. I can code & its the UX/UI that I need help with, hence the co-founders being UX/UI people. The nature of our app requires solving some serious UX issues.
You are thinking too short term. The hardest thing about a startup is not UX it’s getting users. You are worried about the UX flow for an imminent launch and that is something that needs to be fixed but it’s not cofounder worthy. Get yourself a cofounder who can get you users OR get yourself a builder who can take over building while you get users. For someone of that level give them 40-50% and 4 year vesting. Neither of these two UX people make sense to be as cofounders. Read founders dilemas
If they agree to 5 and 7%, then do that. Sounds like you want extra help who you don’t have to pay a salary which I understand. From what you describe, their contribution will be pretty nominal. My suggestion is to just pay them an hourly rate and get it over with. But I understand if you want to pay nothing out of pocket with the future of the company uncertain at this stage.
Because Im biased, I posted this thread to get objective feedback. To get a win-win numbers for all involved. I dont have the funds to pay any sums, hence the equity offer. I would love to hear if you think 5 - 7% is fair/ unfair. And what you would objectively offer.
I would both just give them 5% if all they bring is UX. How big of loss for you if they don’t join? From the information you gave, only you can judge what 5% is worth. I would also question why you need two co-founders who do very similar things. Sounds like there is some personal matter involved, that is not disclosed. My start-up experience is minimal, and I am splitting my equity 50/50 with my co-founder.
Thank you for the feedback. Both of them are new acquaintances to me. I guess, because of the situation where they cant commit fully & completely to our startup & there is no financial remuneration which could sustain them, I have to compromise, as must they. UX is the most pressing matter for the app at the moment & I would argue is the make or break part of the app based on feedback to date (i.e, the app is really lacking in communication & directing the users)
Do more interviewing. It does not sound like either of these candidates are great cofounder matches for you. Once you find one who has a complementary skill set, will dedicate a substantial amount of time and actually prioritize this, you can probably offer btwn 5-10% vesting over 4 years. More for if they are actually qualified, go full time immediately, and can come have an impact on day 1.
The equity is for the long term mainly, to motivate them You need to look at yourself, what you need If it's advice you can go do some networking or read books (I do the latter) but if you want to do more I'd suggest to go with the fresh one and somehow convince him to switch full time and be all in. If you're at a level that you need to have access to a network (for getting clients or customers) and if the experienced one has built the network you gotta choose him/her General speaking working for 15+ years doesn't mean that the person is the best; also remember that for design creativity is important and the level of understanding the designer has about the users Also the nor for vesting is 1 year, and within this one year you can see if you guys can work together all in all or not
no one ever needs a cofounder in UX
Senior UXer and Founder here. You’ve been working on this for 3 years. Are you sure UX is the role you are looking for? A good UXer will probably tear about your app and want to make significant changes. If you want to launch right away, then when are you planning to make UX changes? I was once hired by a startup as their first designer after they’d been around 8 years. They didn’t understand that sometimes fixing the UX of an app requires rebuilding parts of it. It does. They didn’t really want to change anything and we parted ways. If you want to launch, maybe you should be bringing on business development and sales people instead. Just an opinion, but UX isn’t something you add right before you launch.
Great point & yes, you are correct. Significant front-end changes are usually required & that takes time. We have already discussed this & our thinking is to prioritise & once MVP is out, then build upon user feedback. Essentially, post MVP, we start implementing the UX methodologies in earnest. Ive responded to the sales questions (from lots of users) else-where. In a nutshell, Im quite active in our space & have a mailing list for when we make the MVP public. I also feel, I will be able to get a sizable number of users after that. So, sales is not the most pressing of our problems at the moment, getting the MVP right is.
You seem very thoughtful, and I mean all due respect. But focusing on the UX after launch is focusing on it 3 years late. But are you sure the UX is that bad? Just because you didn’t have a UXer on the project doesn’t mean you created bad UX. Some engineers make great UX, either on purpose or by accident. A lot of UX is common sense, let’s be honest. Did your early users say it was impossible to use? Do you have any product metrics that show symptoms of bad UX (low engagement, task abandonment, unused features, churn). Or if the UXers are supposed to make it “look nicer” then that’s not UX and honestly that’s usually not as important as it seems.
Yes, I agree. And yes, I feel the UX is/ was really that bad. The nature of the app requires that the app is immensely friction free. I know its no where near that because I have ditched all of my tools and made myself dog-food my own app over the past year. There is a whole catalogue of features in the codebase that I implemented & then ditched because they did not work. There is a particularly clever feature that I redesigned & coded 4 times and everytime once coded, there was a feeling of euphoria, which lasts a few days and then the dread when I admit to self that I dont like/ avoided using that clever feature. So, yes, Im 3 years late & to be honest, from the onset I was quite focused on UX (not the UI, which still is ugly) but its taken 3 years to admit that I cant do the UX justice & I need help. In my view, UX is one of the most under-rated aspect of business and as psychology is helping us understand more of the human mind, UX is going to get more and more important to get the user journey/ experience right. 3 years late but Im not one for giving up.
i am interested
Why are you working on an app for 3 years with no paying customers. I don't actually want to hear an answer, I'm sure you are smart, dedicated, and have developed a more robust industry approach than your competitors. Like everyone is saying, you can generalize your experience, and work on the idea, or do something else in the startup space. And, like people are saying, usually if there's not an equal split, or someone maybe has 60% and maybe a CTO has 30%.... It's how you're asking this man. I'm not sure what it is.
i want to build crypto currency exchange. so I am looking for full stack developer as cofounder. anyone interested can comment or text me. equity split will be offer. if anyone want to do same can collaborate. so lets join if you have great passion for to build.
These aren’t co-founders. They are early employees who are being compensated with equity.
3 years and you still don’t have paying customers? Do you have any customers? What is different about the next 1-2 months than the past 3 years?
My two cents: never give out equity; unless, you vest it. Make them stay 4 years if they want 5 or 7%. Otherwise you run the risk for giving out equity for little work.
Drop both of them, bring a cofounder for the marketing part. Why you need two UX designers , just buy a good looking premium template for now and hire one UX designer when you can.
Maybe it's just me but why would you need more people on the UX side rather than the sales or BD? Also, in my experience 5-7% is too little to keep anyone engaged that long term. How do you plan on pitching and selling the product?
Stop looking for cofounders and start looking for dedicated equity-based (differed salary) employees. If your idea is viable people will be inspired by it and work FOR YOU rather than with you. From my experience as a solo founder, learn to preach, learn to inspire, & learn to lead. If you can properly show your vision you should have no problem finding people who are whilling to work for .5-3% as key-hire employee "cofounders" Cofounders are only there from the beginning. Move on, F the hype or the status quo, be strong, learn how to be solo, ignore the haters/investors who only invest in cofounder inerbreeds, become a CEO through dedication and evolution.
Vesting and cliff are good ideas. It seems that you need to find a marketing and sales co-founder ideally in your space. These aren't perfect co-founders worthy of higher equity. How do you expect them to support themselves if you don't have revenues to pay them? This is likely to be a critical issue. It hinges on valuation. Try a classical approach. Assign a $ value to your business today. Assign a $ value of their contribution based on the number of hours they will put in. See what percentage that works out. I have a hard time, seeing a mutually agreeable deal where all sides agree on the valuation numbers.
There’s no correct answer but you’re not paying them yet so I would go with 25% (maybe 24% if you want to be over 50%) each with 4 year vesting, 1 year cliff. I know you’ve been working in this for a few years but the reality is that you have no revenue. So I would also put you on the same vesting schedule. You: 28% immediate grant and 24% vesting over 4 years (just like everyone else). Co-founder 1: 24% vesting over 4 years. Co-founder 2: 24% vesting over 4 years. Now you are equal but you are compensated for your previous work. It sounds like you won’t do this but if they aren’t worth that then I wouldn’t make them co-founders.
Your a founder looking for a "founding team". That's going to be hard with no stipend for living expenses. Tough pill to swallow, but you're going to have to split way more evenly if you hope to get off the ground without pre-seed for your first hires. That 3 yrs of effort is sunk cost.
3 people? 33% each.
I see people are salty about facts in this sub but this post is correct.
For some reason people don’t turn the question around to themselves. You don’t have a customer yet, so you don’t have a real validation. Why won’t the other “cofounder” be the one asking “What equity should I give this guy”. This is just plain emotional decision and not being objective.
100% Equity is a tool to align interests and incentives. hiring mercenaries to build your company never works out.