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Ask HN: How much equity should I take?
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8 points
by artilheiro
4961 days ago
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I am being invited to join an early stage startup. Actually, it's in pre-startup mode right now. They have an idea, they have a well connected angel/seed investor, they have the content and a designer. What they don't have is an engineer or a tech lead. That's where I would come in. How much equity should I ask for? |
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W = opportunity cost value of other people's labor (i.e. if their time is worth $20/hour and they will have to put in 1,000 hours to earn their share(s), W = $20,000)
X = value of the idea with nobody to implement it (converges to 0).
Y = value of the investor's cash investment
Z = opportunity cost value of your labor (i.e. if your time is worth $50/hour and you will have to put in 1,000 hours to earn your share at future time t, Z = $50,000)
Your fair equity is ( Z - salary ) / ( W + X + Y + Z ).
Many nontech people get pretty upset when you come up with this formula and turn the crank- they think their time is worth more, their idea is worth more, and your time is worth less. (Or they didn't think, they guessed or willed it to be different).
Please try the formula approach and let us know how coming at it with a formula (where you fill in the numbers together) did for your negotiations.