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