> And usually, first employees just don't share the passion for a startup in the same amount founders do, which means there's probably less self-initiative and less contribution to the product itself.
As someone once put it:
Give me 1%, and you get 1% of me.
Give me 10%, and I will be motivated.
Give me 30%, and I will ask for 20 and work harder than you ever thought it was possible for a human being to work.
PS: "At the end of the day, their job will only be transforming my thoughts into code." is a really really really bad signal to be giving. With that mindset you've probably made it onto the blacklist of most developers. The only ones you'll be able to get are the ones who can't get a job anywhere else.
I'd really work on that attitude if I were you. Friendly advice as a Slovenian to a fellow Slovenian.
I think you got me wrong there, I didn't want to underestimate the value of developers' skills - I merely tried to point out that equity shouldn't be given lightly. What if I had 2 or 3 first employees? Should I give 20 to each one of them?
Since you're a freelancer, you should understand this - if I needed your services, I'd hire you for an agreed amount and I would expect you to deliver what we would agree upon. I trust your expertise, get the product developed and still have all the equity. If I wouldn't be satisfied, I'd find another freelancer, loose some money, and still not loose any equity.
Thanx for the tip though :)
EDIT: Let me try with numbers: I can get an investor to invest, let's say $50k for 10%. Now a first employee demands 20% so the value they bring in must be $100k worth, right? But if I instead hire a freelancer, I pay him $10k or $20k for what the first employee would have done, have the working product, and own 90% of the company instead of 70% and still have some cash from the investment left.
Yes, everyone should value their skills highly, but at the same time realize that everyone is replacable too. Including you and me.
Yes. Now considering you were wise enough to put in a 4 year vesting with a 1 year cliff that means the employee is going to work 4 years to get that $100k. That amounts to just $25k per year.
Congratulations, you just got a very devoted developer for a measly $25k/year bonus that there's an 80% chance you'll never have to pay up.
And if they don't turn out well in that first year, you don't owe them anything.
After the cliff, let's say they get 0.5% per month. The time they leave decides how much you have to buy them out.
Vesting is a wonderful thing ;)
EDIT: You also have to consider this - "If they're that good that they can singlehandedly build your MVP. What are you offering that they would rather take 20% of yours, than 90% of their own?"
How? Vesting doesn't have to be noted in the books immediately, just make a contract which specifies all the details of the vesting without actual transfer of shares, which happens under specific circumstances (e.g. an exit, expiry of the vesting term etc.)
You should probably know that before you start dealing with a prospective employee. If you are hiring quality people then it is definitely worth it. If you don't know for sure then you should not be hiring anyone.
Just wanted to note I get its an analogy. I also remember that being said somewhere too. But funny enough, most won't take 20. They'll do the full 30 or more. LOL
As someone once put it:
Give me 1%, and you get 1% of me.
Give me 10%, and I will be motivated.
Give me 30%, and I will ask for 20 and work harder than you ever thought it was possible for a human being to work.
PS: "At the end of the day, their job will only be transforming my thoughts into code." is a really really really bad signal to be giving. With that mindset you've probably made it onto the blacklist of most developers. The only ones you'll be able to get are the ones who can't get a job anywhere else.
I'd really work on that attitude if I were you. Friendly advice as a Slovenian to a fellow Slovenian.