Startup questions: first employee or co-founder, compensation or equity?

By , ITworld |  IT Management, keen.io, Michelle Wetzler

Is the first hire an employee or co-founder? And how do you decide the balance of cash versus equity in a startup?

New startups have to handle hiring, and decide if the first hire is an employee or co-founder. Jacques Mattheij addresses that directly in “First Employee or Co-founder?” If the idea guy and sales guy want you to be the developer, Mattheij believes the third person, the developer, should be a co-founder.

Michelle Wetzler details her story with Keen.io (with numbers) and writes of her struggle to come up with the right balance of cash and equity. Complicating her decisions are the facts she's competing with friends, not nameless “other” employees, and the fact her fiance is the CEO. Wetzler, and her friends, got 1.25 percent each in restricted stock.

Promises

And if they ever promise to give you equity after your first contract as "first employee" tell them to f**k off and find some other sucker.
Too-trustingTim on jacquesmattheij.com

The job scene is so different here in the midwest, I am trying to get a job at a startup and will be lucky if I get any type of offer at all, certainly no equity.
dylanized on keen.io

the methodology is flawed because of the unique circumstances of the author being engaged to the CEO. This skews the inputs upward in her favor.
rprasad on news.ycombinator.com

Balance

As soon as you can afford market rate salaries you can stop splitting equity unless someone brings something really special to the table. The equation should be something like 'company diluted + new person' > 'company without that person'. As long as that's the case everybody wins.
jmatteij on jacquesmattheij.com

A more plausible story is offering $50-100k and then equity levels which ramp up rapidly as you go down to $50k. Someone taking $50k vs. $60k should get more than $10k x 4 of extra equity.
rdl on news.ycombinator.com

100/0.1 and 50/1 suit very different persons, the company should decide which type it's going after and limit that range.
ricardobeat on news.ycombinator.com

Contrarians

I mean, negotiating salary and equity with future husband. That's not negotiation, especially not in business sense.
markokocic on news.ycombinator.com

Just because one is a friend doesn't mean I would want him/her in my company. In fact that would be the opposite.
Upintheair on keen.io

I'll admit: my issue here comes down to hating sliding equity/salary scales like this one.
tptacek on news.ycombinator.com

Have you negotiated the salary/equity balance in a startup? Or faced the first employee/co-founder question? If so, tell us how it all worked out for you.

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