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What equity should the first employee get?

What equity should first employee get given that he will be offered below market average(25% pay cut approx)? The role of first employee will be principal developer whereas there are 2 founders(1 technical and 1 non technical).

I saw a relevant post in HN before but it is over 7 years old.
What is the current market trend in giving equity to first few employees?

I would first way in on their worth, what are they bringing to the company? The HN article is still pretty relevant. Id say not go higher then 2 percent. The first hire is usually going to be some one who is going to help build out the core product and be a huge part of the company as it grows and gets big. If you trust the person and they have shown they are just as devoted to the company as the founders id say go as much as 2. If they are doing a great job handling tasks that take pressure off the founders but maybe not super devoted give them 1 percent.

Do test run with them, that will help you gauge the worth of the individual to your company.

If you’re offering well below market rates, expect to have to offer a higher % of equity. For 1st employee I’d expect to see at least 4-5% if working for a reduced rate.

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I´d ask a couple of questions if I got that kind of offer

  • What´s the estimated value if the company meets a viable plan?
  • Is the company funded to meet that plan, and how much will it be diluted when raising capital?
  • What kind of risks am I taking? (Do you have any capital, or will it be 24/7 work to help the company succeed in its first pitch ? )

If you have an experienced investor on board, that person might be able to give excellent advice on how you set up the employee pool of shares. :slight_smile:

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I highly recommend reading this article by Fred Wilson and this article by Paul Graham. If you are not familiar, these are two very very experienced, and successful, investors.