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Q: What % equity in a startup should I receive? ( No Answer,   2 Comments )
Question  
Subject: What % equity in a startup should I receive?
Category: Business and Money
Asked by: bongoman70-ga
List Price: $20.00
Posted: 14 Jul 2005 17:02 PDT
Expires: 13 Aug 2005 17:02 PDT
Question ID: 543653
I'm a vp of sales for a startup 4 employee company.  I was offered 
an equity position in the company.  Are there any benchmarks on what
percent equity of the company I should receive.
Answer  
There is no answer at this time.

Comments  
Subject: Re: What % equity in a startup should I receive?
From: esmartbusiness-ga on 15 Jul 2005 13:29 PDT
 
Dear "Bongoman" if you bring some capital with you then your % will be
according to your "investment"; if not, then is not an exact % that
you should receive, you may conclude this with the business owners.
The real fun starts when you come to the titles "Director of Sales and
Marketing" and "V.P. of Sales and Marketing." Sometimes a company
calls its sales manager the head of "sales and marketing" to impress
customers, when in fact that company may have no marketing program to
speak of, even if the Director of Sales and Marketing insists that a
lot more sales could be made if they did...
Hope this to be helpfull,
Robert
Subject: Re: What % equity in a startup should I receive?
From: govmil-ga on 16 Jul 2005 00:19 PDT
 
I'm assuming 100% of the company is controlled by the founder. 

You indicated the company is a startup which typically implies little
to no earned equity. In fact, whatever equity is published to the
company's financials is probably paid-in equity from the founder.

Finally, it is also assumed that you are considering joining the new
venture and an equity position is a component of your compensation.
Right?

At this juncture, conceding a percentage of the company works against
the founder.Since the company is a startup anything given to you has
value only because of his paid-in equity. In a sense, he would be
paying you simply to walk in the front door.

Instead of asking for an arbitrary percentage right now, write a
performance clause into your compensation package. Study youir market,
products and competitors. Project as realistically as possible where
you believe the company will be in six months, 12 months and two
years. Don't go any farther than two years. Anything beyond that time
frame is too speculative.

From there it's really quite clear and simple. Submit a request for an
equity position based on hitting key objectives during a 24-month
period. The founder can justify the equity distribution because of
your achievements.

You win two ways; one, you earn the equity position through success;
and two, the founder treats you as an equal because nothing was handed
to you.

What criteria will help determine your percentage? 
It's impossible to say without studying your industry and potential
for growth. A good guideline in a startup situation is a two year
performance period with a goal of 25% equity.

It all comes down to establishing realistic milestones that you can
accomplish. Yet they can't be too easy because the founder will reduce
the percentage.

Good luck.

RJ

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