I was offered a co-founding position as a designer for a dotcom startup, how much equity and base salary should I receive?

Asked about 3 years ago - Palo Alto, CA

I am afraid I will look over paperwork and sign the wrong documents.

Attorney answers (4)

  1. Frank Wei-Hong Chen

    Contributor Level 20

    Answered . The amount of equity and base salary are not legal questions per se, but rather business decisions. If you are contemplating being a co-founder of a start-up business, then you definitely need to seek legal counsel to protect your interests. Perhaps the most important provision that your attorney will need to look at is the buy-out provision.

    Your attorney will also be able to advise you on the form of entity and the organizational documents for the business, which are important if you are also going to serve on the board of directors of the corporation or as a managing member of the LLC.

  2. Frank Wei-Hong Chen

    Contributor Level 20

    Answered . The amount of equity and base salary are not legal questions per se, but rather business decisions. If you are contemplating being a co-founder of a start-up business, then you definitely need to seek legal counsel to protect your interests. Perhaps the most important provision that your attorney will need to look at is the buy-out provision.

    Your attorney will also be able to advise you on the form of entity and the organizational documents for the business, which are important if you are also going to serve on the board of directors of the corporation or as a managing member of the LLC.

  3. Shawn Regis Jackson

    Contributor Level 15

    Answered . As you might imagine, the "equity position" and the "base salary" are functions of your various skill sets and what you bring to the table as compared to what others can bring. Secondly, the "equity & money" will need to equate to the business plan and the projected income. If you would like to see a FREE MEMORANDUM on stakeholders and founders compensation plans, just send us an email.

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  4. Mark S Britton

    Answered . This question has all sorts of variables, but let me offer some general thoughts:

    To start, the fact that you are being *offered* a co-founding position sounds like the business plan is already largely in place and you are coming in to help product management design the product. Those that came up with the “big idea” and those that execute on a macro-level — e.g., product managers, CEO, CTO, etc., are usually going to take a larger equity stake. Here is a great recent article on co-founder splits:

    http://www.geekwire.com/2011/wrong-answer-5050-...

    As far as base salary goes, it depends on so many things, including your experience, reputation and previous “wins”; the company’s cash position; how much you are taking in equity (if you take a large chunk of equity, you should not also be expecting a large salary); how hot the market is for designers in your area; whether you can do Site IA, UI or UE work as well as simple design; how good of a negotiator you are; etc.

    One thing that has really surprised me is how much designer salaries have gone up in the last 10 years. Due to lower start-up costs, more and more companies are being created and needing design help. Talented designers often have their pick of job offers and can even go out on their own — i.e., start a design company — and make a ton of money both in fees and tax deductions. In the Valley, most talented, experienced designers are looking for salaries that are $100K+, whereas a decade ago such salaries were reserved for a select few.

    As far as paperwork and documentation go, you will probably have a founders/shareholders agreement, stock purchase agreement, possibly a technology assignment agreement, and possibly an employment agreement. If the company has counsel and all of the founders are on equal footing, I would be comfortable relying on company counsel to put together all of the docs and give you advice re: your contractual issues vis-í -vis the company and other founders. However, if you are coming in as more of a subordinate founder (which looks a lot like an employee) then you may want to have your own lawyer look over the documentation.

    Good luck!

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