Dear Sastra: What is a fair amount of equity for the late co-founder? , Sastra

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Dear Sastra: What is a fair amount of equity for a late co-founder with 2 original founders?

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“Late” co-founders seem more and more common to me these days. I call him the ex post facto co-founder. And they are wonderful. You can find a proper Epic co-founder Absolutely Later. There is no rule or law that it has to be 0 days.

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If in your first year or two, you can often catch someone with such a great commitment and such great management skills that they are co-founders in all sense, except when they started – hire them!!

So what is a fair amount of equity?

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If they actually carry the weight and responsibilities of the early founders, and it’s a pre-actual product market fit (e.g., <$10k in MRR for example)... I'd say 1:2 or 1 The :3 ratio is correct, depending on the contribution. Probably 1:4 if you have a product-market fit.

This is appropriate. 33% of co-founders on the first day when material progress is made. Maybe a little more depending on the situation. Maybe Day 1 founders have 25%, if you’re a quick but genuine, product-to-market fit. If you have anything.

And if it’s an afterthought, after-product-market fit, that’s tough. Once things started falling apart. But at least try to get them 2x what they would have otherwise. What would be 2x the same VP/SVP.

It seems reasonable, and proportionate. And proper what you should do in this scenario.

(note: an updated SaaStr classic post)

Published on 29 October 2022

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