sweat equity/not founders
Warner Onstine
people who are willing to do things for sweat equity but will not be
partners (i.e. - one off development or for a specified number of
hours).
What has been your experience with this?
How did you determine the percentage of shares to give to the people?
Thanks!
-warner
Adrian Hass
Hi Warner,
If they are not intended to be partners, I'd suggest you look into
phantom/virtual shares. A real stock owner has quite a large amount of
rights and might become quite unhandy, when it comes to negotiations
with VCs and Business Angels. For phantom stock you can define the rules
pretty much yourself from "you get paid as soon as I get the first
financing" to "you get your money upon an exist of at least 5 million"
without and veto right etc. These rights are quite easy to valuate and
are simply deducted from current business value in every financing round.
As for the amount of stock, they can make you an offer how much money
they would charge you for the amount of work they do. Let's say 25K.
From then on it's quite difficult and depends on how much the trust in
your idea... I guess you might be best off developing a realistic seed
financing scenario: maybe 100K for some 25% stock, meaning your business
is valued 400K. If you had that, then the value of the 25K work yould be
worth 1/16th or 6.25%, but you have to account for the likelihood, that
you get this financing done. This largely depends on how well the guy
believes in you and your idea. Here I would not go below 50%, but start
at 90%.
Regards,
Adrian