I've recently been approached by an experienced web entrepreneur who I know reasonably well to cofound a new venture with him. He brings all the technical knowledge, the idea and the initial execution know-how. My role is basically as a smart guy that can drive the process along and do some of the more laborious things that are absolutely necessary to push the business forward. I'm more of a commodity in that anyone with a few years of good professional experience and a solid educational background could probably do my role. That being said, the business doesn't get off the ground without me and he trusts me. It wouldn't be a full time job for me but more like 10-20 hours a week. Are there any suggestions on what a fair equity split would be in this situation? Are there any negotiating points I haven't been considering? Thanks
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It sounds like you're bringing straight labor to the venture, so you can quantify your contributon by measuring your wage rate times hours worked. Say 20 hours a week, $50 an hour, 52 days a year. That comes out to approximately $50K in contribution. If the venture is worth anywhere from $250,000 to $1,000,000 you can argue a fair share of equity would be between 5% to 25%. Of course, the experience could be very valuable to you so I would be careful how hard you negotiate. |
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Try putting yourself in a position of the other side. You might also read what equity investors focus on by reading this http://www.online-business-advice.com/category/investing-guide/equity-investors-a-guide-becoming-warren-buffet.html. |
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