Ask HN: What % of equity is a technical co-founder worth?

https://news.ycombinator.com/item?id=2369754

by pepdek • 15 years ago

13 22 15 years ago

news.ycombinator.com

At this point I own the idea(worth=$0) and 100% equity. And without a technical partner I have no beta product. He's open to the idea of equity in the company.

I'm a business-minded, action-oriented guy. I feel I'm good at team building, marketing, selling, partnerships & strategy. The real business side of things.

He knows the technical side. What is fair 15%? 45%?

Animus7• 15 years ago

Could he do this without you? Could you do this without him?

This is what I ask myself whenever I think of this question.

dglassan• 15 years ago

50% no questions.

You need him or else you do not have a product. No product means no company.

No reasonable developer would take anything less than this...If they're going to be putting their energy into developing your product for the next 1-3 years (minimum) then you need to split the equity with them equally.

pedalpete• 15 years ago

agree with the 50%, both of you should be vested.

You want all co-founders to be equally engaged in the company. Anything less than an even split at the very start sets up a structure where one feels they are getting less than the other.

You mention the things that you're good at and call it the 'real business side of things'. Does your 'co-founder' find this insulting?? Is he really just a code monkey? Somebody who can build YOUR product? If so, he isn't a co-founder.

If you are building a technology company, all your 'real business' skills are worthless without a person who understands the technology. BUT your technical co-founder should be well versed in the market also. Together you will be making the product market fit. Together you'll be making partnerships/sales work. Together you'll be building and managing the team.

If you aren't feeling the 50-50 split, I'd ask, is he really a co-founder?

bherms2• 15 years ago

When it comes down to it, despite how you feel you're good at "business", if you find a good technical co-founder, you're going to actually be close to worthless (considering you get a really good tech co-founder, not just a programmer). Business is easy for smart people. It's mostly common sense, personality, and drive. Once you find a really good technical co-founder, chances are the answer to "Could this business survive without him?" will be "No" and "Could this business survive without me?" will be "Yes". Keep that in mind when you think about a ridiculous share like 15%. Start at 50/50. His shares can go up if he brings more to the table. Yours can go up if you learn to code.

mindcrime3• 15 years ago

if you find a good technical co-founder, you're going to actually be close to worthless (considering you get a really good tech co-founder, not just a programmer). Business is easy for smart people.

I'm sorry, but I have to "call bullshit" on this (as a generalization anyway. I don't think we know enough about the specifics here to really say if the OP - specifically - is going to "be close to worthless" or not).

There are particular skills and talents that good people on the "business side of the house" have, and they're not necessarily things that come easily to just any smart person. I mean, sure, most reasonably smart people could probably teach themselves to make cold calls, generate leads, go on sales calls and close sales... but not to any greater degree than you could say "any reasonably smart person can learn to write code."

In the end, specialization and division of labor are a good thing, and a solid business needs people who have chosen to focus on, and develop skills in, different things... and the business side is no less important than the product side.

And if you really don't believe me, go round up 10 random engineers with no selling experience, give them a list of phone numbers and a stack of data-sheets and tell them to go sell a product, and see how that turns out.

bherms2• 15 years ago

I'll give you that... It certainly depends on the person and past experience and I did generalize a bit based on my experience with technical co-founders I've known and worked with. When I said a "really good" tech co-founder, I kind of implicitly meant someone easily capable of or already possessing some of the skills necessary. I look at myself or some of my successful friends and all of them are tech co-founders who learned the business stuff pretty easily and have been successful. In cases like that, if some mba grad tried to sell them on "oh, i'm a business guy" (which has happened quite often), they'd always get told to fuck off.

mitchf• 15 years ago

85% Tech Founder, 15% Business Person. It's not the idea, it's the execution.

keiferski2• 15 years ago

Really getting tired of the constant reiteration of this soundbite. It's much, much more complex than that, and the constant chanting of "ideas don't matter" just leads to groupthink.

For example: what if the bulk of your product is copy (writing) or design? All it needs is a simple account system and framework built around it - the majority of the work is nontechnical. That's not to say that it is easy or simple; rather, the work is just not technical in nature.

Technical execution deserves 85% in a tech-heavy startup. Technical execution deserves far less than 85%, probably even less than half, in a non-tech-heavy startup.

The OP didn't specify "what" his site is about, but regardless.

levifig• 15 years ago

And I'm tired of the constant rebuke of a perfectly good soundbite by people that have no idea of the distinction of "idea" and "execution". Design and copy writing are as much part of "execution" as code is. They are also as technical as code is, just not your idea of technical.

Good ideas with average execution are forgettable. Average ideas with great execution are memorable.

sixtypoundhound• 15 years ago

There is no single answer to this question - it's totally dependant on the relative value of your contributions to the company's success. Where is the secret sauce going to be?

If you're building a mass-market offering (eg. facebook or SAAS), then they are worth a lot. New crypto product? New search engine....time to pony up.

If you are in a space where sales and marketing is more important than technology (eg. a groupon clone or anything where you're reselling an existing framework), then I'd retain the lion's share of the equity. You aren't going to win on technology.

Are you putting capital into the deal or raising a large chunk of capital to get started? Are they drawing a salary of some sort? I'm not giving 50% of the equity away to an employee or someone who I'm otherwise supporting.

Finally, while this is usually a bad idea, what are the alternatives to adding a tech co-founder? Can you outsource? Use consulting help?

While the latter is usually an express route to total stupidity (most startups with outsourced development quickly become comical), if you could truly run the operation without a dedicated in-house tech person, I'd retain a larger share of the pie.

Finally - I disagree that "business is easy for smart people" - a good business person can add a lot of value to the team, particularly if you're targeting large companies. Many entrepreneurs make significant mistakes in their deals and delivery process that put their company at risk - a good business guy should be able to reduce those risks and accelerate the pace of execution.

And no..I'm not a MBA...I straddle the two camps (business guy who can code and codes a lot).

RRiccio• 15 years ago

But how do you draw the thin line between a "Facebook" startup and a "Groupon" startup. There's so much between those two realities.

I have the same question as the OP.

Also... How can you differentiate between a technical entrepreneur and a coder? Because I'd really be willing to give lots of equity to the former, but none to the latter.

allanchao• 15 years ago

Sorry, but usually idea is worth virtually nothing. Having been a technical co-founder before and now the business founder, I've been on both sides of the coin. Unless you have actually built a profitable business before, it's very hard to justify the value that you bring to the table.

The technical co-founder already has experience and pretty much knows the issues he's going to face, and how he's going to handle them. If you haven't built a business before, then you do not know the issues that you'll face or how you're going to handle them. So his value probably far outweighs yours, even though it's your idea.

bdmorgan• 15 years ago

At first glance, I agree with most others that "the idea itself is worth 0%". Having said that, we all know that's not always true...there's a looooong list of ideas that were so brilliant at the time of their inception that - combined with good fortune and perfect timing - the initial crappy implementation had no real negative impact (hello, Windows 3.0, hello Facemash, etc.).

So your idea may be brilliant...probably not, but maybe so :-) If you have already prototyped it out, have a basic wireframe built, have a good business plan in place, and have some funding lined up (either your own or from some external source) I would say that a technical co-founder would be at most worth 20-25%. From the gist of your question, though, it sounds like you have an idea in your head and that's about it. If that's the case, you gotta find your co-founder and immediately agree to a 50/50 split...maybe give them a 6-8 week 'trial phase' just to make sure they aren't a total fruitcake and are going to bail out on you, then lock it all down legally and move forward from there.

What people are trying to tell you in the other posts is that HARD skills >> SOFT skills when it comes to launching a tech company in the very early stages. Look at your descriptions:

* "business-minded" - hard to quantify * "action-oriented" - every great developer on earth is this as well * "team-building" - if you were great at this, your first stop wouldn't be at Hacker News for advice on how to build a team * "selling" - I agree that this is actually a HARD skill - either you got it or you don't. If you have demonstrated track record in this area, this is your trump card. * "partnerships" - soft skill...mostly manipulating paperwork with lawyers at the end of the day * "strategy" - you will easily be splitting this one 50/50 with your technical co-founder

Meanwhile, a good tech co-founder is going to bring:

* Specific dev experience - hard skill * Knowledge of architecture and scalability - hard skill * Knowledge of SEO and online technical marketing - hard skill * Ability to augment his/her skill with other good tech people out there, selecting from their own personal experience or interviewing based on their own skills - hard skill (i.e. business guy has no hope of locating and finding these people, IMHO)

Sorry for the long explanation. Bottom line: you gotta go 50/50. If your guy is not worth 50% in your mind, you have the wrong person.

krisrak• 15 years ago

technical co-founder should get >50%, he can build product without you, u cannot without a technical co-founder. If you are a marketing guy then try starting business like groupon that requires more marketing and sales talent than technical talent at its core. If the core of the product relies on building good web app/mobile app then technical guys don't need you, if the product is great people will come onboard without help of any marketing guys. This does not work in case on businesses like groupon, which relies on building partnerships with good brands, that where pure marketings guys should focus on building.

kls• 15 years ago

I am not sure I totally agree with this, If the non-technical co founder is a business dev and sales guy he is just as important to the equation. And I would say there are a good deal of technical individuals who should not have controlling interest in the company. I say that as a 3 time CTO of start-ups and a very technical person. I was in no way qualified to be the controlling party of any of those organizations. I have a good business intuition, but my partners where way more qualified in what they do, if I held controlling interest, I may have forced issues that I was wrong about. I agree with 50-50, but if I where investing in a company I would be leery of a company where the technical and not business partner held controlling interest.

mindcrime3• 15 years ago

technical co-founder should get >50%, he can build product without you

And? What good is a product if there aren't any paying customers willing to buy it? "Build it and they will come" has not proven to be a 100% effective strategy... in fact, history is littered with long lists of products that got built, some at great expense, but failed as businesses.

I think you underestimate - severely underestimate - the value the "business guy" brings to the table... IF said "business guy" is really a top-notch "business guy" and not just "some guy with an idea." Doing market research, identifying potential markets, interviewing customers and identifying pain-points and needs, determining pricing, determining market positioning, determining market type theory, cold calling to get leads, closing sales, raising funds, doing PR, determining channel strategy, generating demand and driving it into your chosen channels, arranging partnerships, etc., etc... these are the things that a good "business person" brings to the table, and they are essential.

nwp• 15 years ago

I'm of the opinion that co-founders should split the equity as evenly as possible.

JoshKalkbrenner• 15 years ago

50% Unless you have cash.

krishmv• 15 years ago

Just wondering if there's a bit more to this than the idea vs. execution argument. Isn't a terrible idea well executed as bad as a great idea terribly executed?

What about skin in the game? If one's invested more capital, or has given up a job earlier to do things like research, talking to customers or building a prototype, his risk is higher and shouldn't he be rewarded for it?

Wouldn't expendability matter? What if the business guy can get a good development team to build the product (there are shops that work for equity) more easily than the technical guy hiring a capable sales agency (there are agencies that work on commission)?

gersh• 15 years ago

How many customers do you know? How close are you to potential customers? How much time can get your potential customers to spend helping you with the product? Now, take the ratio of the amount of time you can get potential customers to help with your product to the amount of time it will take your technical co-founder to develop the product.

Ask HN: What % of equity is a technical co-founder worth?

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