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How much equity should a PT employee get?

We are a bootstrapped company looking to engage a jr. designer & jr. developer to help out. Both folks that we are talking with have full time jobs. They would not be full-time hires & a cash salary is not an option for us right now. What would a good percentage of equity? And, over what period of time should we have it vest?

Would a deferred compensation model (contingent on receiving funding) be another good option? If so, what hourly rate should we suggest/expect?

  • One of the things I love about bootstrapping is how creative you have to get. Get creative about your compensation. Whatever provides value to them. Experience, expanding their network, or just a good time. Things that might normally be benefits. You’re looking for some way to motivate them to spend their time and energy on you, and not somewhere else. Just don’t defraud people.

    Once you’ve exhausted creative compensation, you’ve got cash, equity and convertible debt.

    Cash: It sounds like you can’t afford a cash salary, but try to pay something if you can. I think it’s just easier to build trust that way

    Equity: I would consider this last. The earlier your company is, the harder it is to value your equity. Since you’re not adding a partner, I would recommend paying out shares on the same schedule that you would pay a salary. Monthly or bi-weekly or something like that. Then they only get what they work for.

    Convertible Debt: This removes the valuation guessing problem. You figure out what you would pay them if you could, taking those creative compensation ideas into account, and make up for what you can’t pay them with convertible debt. There are good explanations out there for how this works, so I won’t go into detail here. I would start with this: http://www.foundrygroup.com/atvc/convertible-debt-series/

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    • This is great advice. Giving equity is a very expensive proposition for you and when you can accurately value your business, you will regret giving up so much. Barter and cash are your least expensive options in the long-term.

      Many entrepreneurial teams begin with full-time jobs to help pay for living expenses. If you are willing to give up some equity, then find a great developer and bring them on as a co-founder. It will serve both your near term and long term interests better. Don’t compromise.

      Reply
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