What is a typically % of equity to give a potential 1st employee?

Since the developer is joining pre-product and pre-revenue, we're really talking about a 3rd cofounder, not a regular employee.

Why should the developer take an offer below market salary, without benefits, in exchange for equity that isn't worth anything yet?

A first employee may have around 1%. It should be considered an incentive, because an employee is payed a regular salary based on her market value.

If you don't think this "employee" needs a normal wage and you intend to pay in equity, then you are not hiring: you are looking for your technical co-founder. Every startup needs a technical co-founder (except if you have already raised a few millions to hire a team of top level employees). A tech co-founder will typically have 25 to 60% equity, based on what other co-founders put on the table.

Last but not least: beware of wannabe tech co-founders who would join for low equity. Those ones are probably not worth any equity. At a bare minimum, they are naive, and a startup doesn't need a naive co-founder.

Wowsers - I strongly disagree with the assumption that "tech co-founders will typically have 25% - 60% equity".

This is way too broad. I've done a few start-ups (most with VC funding) and never found this to be the case. It takes more than coders to build a successful business.

Future hires (and co-founders for that matter) should be based on their contribution to projected revenue (Paul Graham writes on the subject - Google it).

If you can't project revenue - stop the hiring process and do your homework.

Vesting also makes this a self-correcting issue. One way to cross-check a good tech hire is to see if it enhances your valuation with VC and institutional investors.

If the answer is yes, you've made the right deal. If not, go back to the drawing board.

1] Whether you find a rockstar or not depends on how tenacious and persuasive you are among other things. (Note: Don't confuse past performance or big company title with a rockstar. You will have to trust your gut for the rockstar.)

2] Its just a business plan and an idea. You don't talk about validation. Hopefully, you were able to convince someone to give you money. That proves you can convince people who can write cheque. That's a great ability for a CEO since you will have to do that a lot, unless you are bootstrapping. Or maybe you have purchase orders.

3] Once you find a rockstar, make him a co-founder and treat him like that. That's how you would build a company.

Technically speaking I wouldn't give any equity to a potential 1st employee, but I would give equity to your 1st employee ;)

Find the right person and be fair. If they're building the product then they are doing a lot more than coding. They're architecting, planning, designing, building and deploying. That person will be an integral part of your team and deserves fair equity, which IMO is 50% if it's just the two of you. Vest over 4 years to protect everyone.

If you're looking for a coder alone then outsource development to India or similar. If spec' right this can be a great way to get your first product built.