How do I compensate for sweat equity in a software startup?
October 9, 2008 3:49 AM Subscribe
How do I set up a fair system of compensation for people contributing sweat equity to a software startup?
I've got a software project that I've been doing alone for a while, learning as I go, and I've realized that with the wealth of talent where I live, I'm stupid to be trying to do everything myself--development, design, marketing. I've pitched my idea to an acquaintance who's a professional programmer, and he leapt at it, saying that he was so bored with what he was doing at work, he would love to have an interesting and potentially lucrative project to do on his spare time. If he's interested, I'm pretty sure I can attract team members with other skills. I have no money to pay anyone now, so all I can offer is equity in the company. How do I do this fairly and appropriately? What hazards does this approach present?
I've got a software project that I've been doing alone for a while, learning as I go, and I've realized that with the wealth of talent where I live, I'm stupid to be trying to do everything myself--development, design, marketing. I've pitched my idea to an acquaintance who's a professional programmer, and he leapt at it, saying that he was so bored with what he was doing at work, he would love to have an interesting and potentially lucrative project to do on his spare time. If he's interested, I'm pretty sure I can attract team members with other skills. I have no money to pay anyone now, so all I can offer is equity in the company. How do I do this fairly and appropriately? What hazards does this approach present?
I answered a similar question previously. Lot of other good responses in there as well.
Since the other person is the programmer and neither of you are bringing money to the table, both of you are working for sweat equity. Set milestones and tie equity payouts to completed milestones.
posted by junesix at 11:47 AM on October 9, 2008
Since the other person is the programmer and neither of you are bringing money to the table, both of you are working for sweat equity. Set milestones and tie equity payouts to completed milestones.
posted by junesix at 11:47 AM on October 9, 2008
I would also recommend reading Hacker News regularly if you are doing any sort of software startup. The commentary trends young and college-aged (and as such, is sometimes naive regarding some subjects that you'd expect young, precocious, 20-year old programmers to be naive about), but is really quite smart. There's a great community over there. The question of 'what's a fair compensation' has been addressed many times (search via google's site search).
posted by fishfucker at 7:54 AM on October 10, 2008
posted by fishfucker at 7:54 AM on October 10, 2008
This thread is closed to new comments.
posted by swapspace at 11:12 AM on October 9, 2008