6 months ago my friend called from Belgium asking if I was interested in helping him take his online startup to the next level and after a naive quick decision I was on my way to Belgium. This is an fellow IT developer who I had worked with for a number of years before and have remained friends.
Just to give a bit of context we are talking about a project that has been progressed into something larger from an original static website. I cant give too much away. It has no seed investment but has won support from government schemes providing. The idea is going to heads with an existing market but with a unique approach of which I admit has gained attention.
The friend said they could not pay me a proper salary but would give me 1% equity and help pay me barely enough to pay the rent. Seeing potential in the product and wanting to help my friend succeed and maybe make a something for myself led me to go along with it. Being the keen developer and good friend that I am I agreed to just get stuck in overlooking the requirement of contract and formalities of the agreement being on paper. DOH.
I took a lead / senior role in front end development with my friend continuing back end development, and the other cofounder paying attention to marketing strategies of which was her speciality. The small monies were paid to me via a independent company of which I set up here in Belgium and so I was I had no actual security of employment and expense of setting up the company.
6 months later and following considerable improvements to the product we are close to recieving a 2,500,000 seed investment for 10% of the company. wow.
Ok, being so busy it is only now I decide to look into equity distribution for 1st employees of a startup at various stages. And …. DOH. After reading many articles on this I determined that ideals even for a lead developer as first employee AFTER Series A investement would be for a salary matching market expectations AND an equity share ( probably common equity ) of 1.5% – 2%. After this I thought, wow, I really am not getting the return for my early involvement, considering I started 6 months before even seed investment and have worked for pretty much 0.15% of my normal salary for this time. OK they increased the equity to 1.5% a few months before this research but I still think this is way below trends considering circumstances.
Now, I go to my friend and approach him about this, offering my research for reading. This turns in to outright accusations from him saying I am going back on an agreement, rather than the consideration of his valuation of my early involvement being lesser than it should be. Ok I was naive in my eagerness to help a friend but I would of thought this approach to him would have been a little more productive. I asked him how got his value of what he offered, his response… “its what I thought was right”. ( No respect for standards then).
Ok I guess what I am asking is…
1) Is my reading that the expectation for a lead developer as first employee AFTER Series A investement would be for a salary matching market expectations AND an equity share ( probably common equity ) of 1.5% – 2%?
2) What would be the normals for a person starting at the time I did in those conditions?
3) Am I right in asking for a re-evaluation of terms? I understand from my reading that renegotiations with early employees is common.
4) Do equity distrbution standards for early employess with startups vary across nations or is it pretty much a recognized standard globally.
I was thinking of putting a proposal on the table of…
As of start of employment with the company on receipt of the seed investment that they pay full salary and offer another 1.5% of common equity. This is still genorous in my eyes for them considering this is seed investment not Series A. Also ensure the original 1.5% is common equity and they offer some sort of reward cash bonus to recuporate losses of salary for last 6 months.
What do you think?
Any input is greatly received.