TL;DR: 1.25% equity instead of a salary for 1 year of work on a fresh startup (no work has been done yet, theyre still looking for a team).
Ive recently been approached to with an offer to join a startup team of 7 people total, all technical in a few different fields. The startup is just an idea now, no work has been done yet, they are still looking for a team.
The format of the startup is something i honestly havnt seen before so looking up typical figures and estimates has proven quite difficult.
This entire operation is run by a CEO with quite a few exits on his hands, he knows what he's doing and i personally have trust in him that he's qualified to be CEO and lead the company, and I also have a lot of faith in the idea, all's well on this front.
The issue is this – The CEO wants to pay the team of 6 people equal equity of 1.25% cliff and up to a total of 2.6 after 3 years total. The idea is that after around a year of working on this in our spare time (we all still continue working as normal), we should have an MVP with a small income to sustain the business expenses, and CEO has vouched to put up to 10k$ up to that point. The moment the business is slightly self sustaining, all the personnel on the team has the option to quit their jobs and join in, otherwise they just get the 1.25%. The CEO wants to bootstrap this idea without investors, and I believe it _might_ be possible, but it could also not be, we are still too early to tell.
I have several issues with this:
- All the people on board are skilled, quality people, but I am without a doubt the most technical in the most amount of fields out of the team – should I get more equity? (Im actually quite fine with everyone getting equal equity, as this will probably lead to less friction. this really could be a non issue, I just wanted to hear some more opinions)
- We don't get a salary, we are paid with equity – doesn't this mean we are founder? if so, why are the team of 6 each getting 2.5 after 3 years and the CEO gets the rest (he personally said he gets 65% By my calculations he should get 82.5% but I think he's reserving some for more members down the line)? (this personally feels fishy, youre the ceo, youre the source of the idea, and youre funding it at the start, but 65% feels like way more than is fair)
- He said that if we end up do getting investors, we all get diluted – doesn't this mean ill end up with dirt while essentially giving an MVP for free?
- Let's say we worked for a year and got the MVP up and running, im worried he might fire me after a year, give me the 1.25% im owed and take the 1.35%, go to an investor and get funding (an investor at this stage should take far less than 30% since there's a working MVP that potentially has profit), and just replace us with salaried staff. Essentially getting an MVP for 7.5% (1.25% * 6) before dilution.
Just to summarize:
- The startup is just an idea at this moment, no work has been done yet.
- The idea is developed after work hours (1-3 hours a day), and we all still work as we normally would.
- The idea _could_ be done without investors, given the road not being *too* rocky.
- A realistic timeframe to get an MVP would be 1 year.
- We are payed with equity for 1 year or until the startup has a small income, thats when we could jump in and get some sort of salary or stay out and walk away with 1.25%. If we decide to stay, we get 1.35% more up to a total of 2.6^ after 2 years of vesting. The CEO gets 65%.
- The CEO funds this from his personal money (He has the money).
Realistically, im looking at this as 1.25% for 1 year of work (not full time work), god knows what is gonna happen after a year and if im going to quit my current job to join in, so im not putting too much stake in the 2.6%.
Any thoughts? What would you do or offer?