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Courting a startup, never been at a startup before and it will be a moon lighting gig likely for equity. Startup is small, hardware in nature, and I would be the first sales/marketing/business guy. How do I value the equity? Founder's bootstrapped and they are about a month to presales on first product. Thanks!
Structure it! Mutually agree on a certain %. Then based on certain milestones you achieve, you get more! And since this is pre-funding, as soon as you get the equity, DO NOT forget to file your 83(b) within 30 days!
Agree with the structure. One easy way is to get X warrants per Y sales. Make sure the warrants have a zero cost execution provision. I have a number of "penny warrants" for work I did for startups. Easy to setup and explain on the cap table. Another option is to have them pay you and buy a discounted note on the next round. The upside is you get seed or a round stock. The downside is it is a taxable event.
Why does it matter whether you get equity pre-funding and file the 83 (b)? And by funding do you mean Series A?
Assume the value = 0. Only take the gig if it's giving you valuable experience that will position you for better roles/companies. If the role isn't delivering that then you're basically working for a lottery ticket.
It's definitely giving valuable experience. I'm learning about a new market and I'm building the tactical marketing and sales systems, compared to just executing them in my day job. I'm just trying to figure out how to value things, which I think I've gotten some good feedback here on. Thank you very much!
Concrete numbers and how much vision/direction the founder(s) have for the company in, again, a concrete way. Honestly there's no real good way to quantify it. Usually a founder says a number and you either agree or disagree with it most times.
Thanks for this, the founders asked me to make a proposal, which is the hardest but I think I will propose the structure, not the compensation since I think they are closer to the value add I bring than I am.
Maybe it's just me, but this is a sign of a bad founder. It usually means he has no clue himself how much the company is worth and is generally gauging it by talking with you. Thinking about value add is an excellent way to frame the conversation, especially with structured milestones (essentially you're setting up vesting).