Hello everyone,<p>My first potential employee is a good friend of mine. I've been bootstrapping from his basement for a while now and he has been very helpful to me in general administrative terms. He is also a very good sales man (in his day job) so I've decided to bring him on board formally.<p>He raised a question recently about knowing how much equity is coming to him. Apparently his wife has been stressing and complaining about the amount of time he spends helping me out. :)<p>His role is principally going to be sales related. Cold calling, meeting clients, and hopefully closing sales of our software.<p>On my part, as the Founder, I wrote the software, invested over $10000 of my cash, and raised over $40000 in debt from family to build the business and run the SaaS platform.<p>If you put yourself in my shoes. What would you think is an appropriate amount of equity is appropriate to offer him? Naturally, it will vest over 3-5 years.<p>Assuming the "employee pool" is 20%, and you still plan to hire more people and the business builds momentum, what would you offer? Or perhaps would you just offer him a commission on sales? or both?
I'd offer only commission on sales (perhaps add in profit sharing if he'll do other work in addition to sales -- you don't want to penalize him for those parts of his job which do not involve selling), that way his performance will be rewarded directly. It's your company and the equity is yours. 100% It doesn't belong to someone you pay to work for you.<p>He might have been "very helpful", but he's not risking everything to build a business. He may have put in a few extra hours on the side here and there (and pay him for those if you'd like), but it really doesn't compare to the time and money you yourself have invested in the enterprise.<p>It's your company. You built it.<p>This fellow's blog (and particularly this post) may be helpful for your situation:<p><a href="http://nukemanbill.blogspot.com/2008_05_01_archive.html" rel="nofollow">http://nukemanbill.blogspot.com/2008_05_01_archive.html</a>
Hi ,<p>First find out your company's worth not just by the investment,
1. go by your time & Effort & convert that into your investment amount,
2. if you market it successfully assume it is successful. Identify the worth in terms of money<p>As you have mentioned that 20% for employees , that's good at least you have decided already.<p>In your situation , for the employee irrespective of part time or full time , determine the effort & work accomplished equivalent in the market. Based on that provide the equity for the resource.
Usually Sales commissions are ranging from 2% to 15% as commission from the revenue generated out of that deal.
Fix a base salary which is something like 50k if it is full time. And add the additional commissions of what ever the percentage you decide.<p>If you can't provide the base salary then think about provide equivalent equity in percentage terms with the condition of being with the company for at least 2-4 years.<p>Be aware that when you want to grow big , you need to go for real investors. You need to provide them big junk of equity.
This is what I do. But feel free to contact me if you have some more guidance.<p>Thanks,
Srini Centhala,
srini@absolut-e.com<p>My Blog <a href="http://Srinicenthala.blogspot.com" rel="nofollow">http://Srinicenthala.blogspot.com</a>
Linked In : <a href="http://www.linkedin.com/in/srinicenthala" rel="nofollow">http://www.linkedin.com/in/srinicenthala</a>
My Company : www.absolut-e.com
I asked that question at <a href="http://news.ycombinator.com/item?id=565045" rel="nofollow">http://news.ycombinator.com/item?id=565045</a> which will probably be helpful. Also see the Equity Equation discussion at <a href="http://news.ycombinator.com/item?id=35015" rel="nofollow">http://news.ycombinator.com/item?id=35015</a>