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I was advising the two founders of a technology company. They had no funding, and they were looking to hire a VP of Engineering.
They found a good candidate for the position, and they only wanted to give him 1% equity vesting over four years. I told them the candidate wasn’t going to take the risk of joining for such a small percentage ownership.
Their answer was, “Why not? We’re going to be worth $1B in a couple of years.”
And therein lies the problem:
You don’t want to be stingy with your equity
It seems to me there are two types of founders:
A. The “Spread the Wealth Founders” where the founders are very generous with equity, or…
B. The “Stingy, We’re in it Only for Ourselves Founders” where they grudgingly give out equity.
You either get it or you don’t get it.
We’ve all watched Shark Tank where, seemingly every week, an entrepreneur fights to keep every single percent of his or her equity. Ask yourself this question:
“Does it really matter whether you have 80% or 90% ownership?”
