What would you expect the equity breakdown to be?

[lwalrod]

@eucatastrophe This site is decent for calculating equity: https://foundrs.com/

 

[sarah1972]

@eucatastrophe Equity should reflect risk, investment, and ongoing contributions.

 

[groov3ydud3]

@eucatastrophe If the two cofounders are going to make the company a success, they should get good equity. 95-2.5-2.5 is a funny distribution. In the beginning lot of heavy lifting will be done by these two while sales person doesn’t contribute much. Once there is VC investment, contribution of the sales guy will become even less significant.

150k salary - based on location they may actually be taking a huge salary cut. With 150k, how can one pay a mortgage in the Bay Area?

I would suggest 40-30-30 or 50-25-25 at the least. If salary is an issue with the first founder, adjust salaries to 100k each. Of course it also depends on the other two - do they think themselves as employees or cofounders? Are they capable of doing the heavy lifting, creating the product, scaling in future to lead other senior hires as the company grows?

 

[tennyson1]

@eucatastrophe 70/15/15

 

[lovelygrace]

@eucatastrophe 90 - 5 - 5

 

[lovelygrace]

Or maybe 95 -2.5 -2.5

 

[acts2416]

@eucatastrophe How about you don't share any equity for now. Make some actual progress and in half a year or year see how much each has really contributed in the success and based on that share equity. Because now you are seeing it as a reward ownership instead of responsibility. I see more you own something more responsible you are.

 

[asaithambi]

@acts2416 The correct way to is vest + cliff equity. Absolutely no decent IC will work for a maybe promise of equity (and 150k is way below market for cash-only comp if they are good). Also, if they get the grant immediately they can do 83b selection to greatly reduce tax liability if things go well.

 

[acts2416]

@asaithambi I wish I would have known this before my previous business. I needed to shut down it because of equity and respective contributions to business.

 

[nicole97]

@eucatastrophe I used to have a pretty similar situation, albeit taking a much lower salary bankrolled by my cofounder

Me and him split 20:60 or so iirc

 

[eu1er]

@eucatastrophe I believe that the funding aspect should be considered separately. Let's assume that the idea is worth $1 million. If the investor decides to invest $200,000, he would own 20% of the equity. The remaining amount can still be divided equally. But their salary still kind of a question. Maybe they need to be treated as employees with a very small amount of equity.