Ask HN: How to give equity in bootstrapped broke startup?
3 comments
If you have no sales yet, and no engineers, then the problems of how to offer equity are smaller than convincing an engineer to take on the work. We have no shortage of people offering us projects to work on. I've been offered 50% equity from people in situations like yours, and still turned projects down because either the idea or the founder simply wasn't compelling.
You sound like you need a co-founder, not a part-time equity-based engineer. And at that point, the legal logistics of figuring out the equity are something you can pursue together.
You sound like you need a co-founder, not a part-time equity-based engineer. And at that point, the legal logistics of figuring out the equity are something you can pursue together.
I was sort of thinking of these engineers as co-founders. But maybe it would be better just to have a single co-founder. Would you give them 50% of the company, but have that vest over time? At say 10% per year over five years?
Higher end of equity - yes.
Vesting - yes, but 4 years.
Also, not a lawyer, but I believe there is a minimum wage thing in California. I think It's mentioned in this startup School lesson (~9 minutes in):
- Video: https://www.youtube.com/watch?v=LBC16jhiwak&feature=emb_titl... - Transcript: https://jotengine.com/transcriptions/NDLakO9K0GVmyY6d8B1uAQ
Also, not a lawyer, but I believe there is a minimum wage thing in California. I think It's mentioned in this startup School lesson (~9 minutes in):
- Video: https://www.youtube.com/watch?v=LBC16jhiwak&feature=emb_titl... - Transcript: https://jotengine.com/transcriptions/NDLakO9K0GVmyY6d8B1uAQ
I'm concerned about giving away too much of the company because that might hamper my ability to give out equity for other positions in the company in the future. I'm also concerned that if I give out equity incorrectly it might scare away investors or companies looking to acquire my company in the future.
Would something like offering an engineer 4% of the company per year be reasonable (capped at 12% ownership after 3 years)? I'm also not sure how a cliff would work in this situation. Maybe a 3 month cliff where I could fire them without giving them any equity if they end up not delivering at all? I'm not hoping to fire anyone, but I would be hiring people I don't know, so I need some kind of cliff.
Here are a few more details that might be helpful. My company is a California LLC with a single owner. No investor money has been raised to date. Unfortunately, I'm not friends with any engineers, so I can't just bring on my friends. The company is truly broke, so I basically need an under $100 solution for this. Something like paying $40 for a month long subscription with RocketLawyer.com is what I'd be looking for. Thanks!