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