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Trading fixed pay for shares on a project which is about halfway complete [closed]
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A few years ago I worked for a software company which paid me an average salary. While there I had an idea for an internal project which greatly reduced costs, and emphasized my employers such project had the potential to become a product, and expand revenues. They agreed on that, but delayed the project in favor of the current "cash cows". I eventually left the company since the technical challenge was not up to my taste any more (unlike the idea I had).
Now they approached me again, asking whether I prefer to work again on a fixed-pay basis or get shares on that project. I'm strongly inclined to ask for shares.
Besides having the idea I coded about 99% of the project during 6 months. It's totally usable inside the company, but I estimate at least 6 more months are necessary to turn that into a real product.
I have two questions:
Supposing I know the expected cash flows of the hypothetical product in the following years, how do I establish a minimum amount of shares that would offset the advantages of working for a fixed pay?
How much shares would be fair asking for? They depend on me on the technical side; I depend on them on the marketing/sales side.
software-industry job-offer equity
asked May 16 '15 at 19:46
Rômulo C
1013
closed as primarily opinion-based by Jane S♦, scaaahu, gnat, Michael Grubey, yochannah May 18 '15 at 7:31
Many good questions generate some degree of opinion based on expert experience, but answers to this question will tend to be almost entirely based on opinions, rather than facts, references, or specific expertise. If this question can be reworded to fit the rules in the help center, please edit the question.
suggest improvements |Â
up vote
-1
down vote
favorite
A few years ago I worked for a software company which paid me an average salary. While there I had an idea for an internal project which greatly reduced costs, and emphasized my employers such project had the potential to become a product, and expand revenues. They agreed on that, but delayed the project in favor of the current "cash cows". I eventually left the company since the technical challenge was not up to my taste any more (unlike the idea I had).
Now they approached me again, asking whether I prefer to work again on a fixed-pay basis or get shares on that project. I'm strongly inclined to ask for shares.
Besides having the idea I coded about 99% of the project during 6 months. It's totally usable inside the company, but I estimate at least 6 more months are necessary to turn that into a real product.
I have two questions:
Supposing I know the expected cash flows of the hypothetical product in the following years, how do I establish a minimum amount of shares that would offset the advantages of working for a fixed pay?
How much shares would be fair asking for? They depend on me on the technical side; I depend on them on the marketing/sales side.
software-industry job-offer equity
asked May 16 '15 at 19:46
Rômulo C
1013
closed as primarily opinion-based by Jane S♦, scaaahu, gnat, Michael Grubey, yochannah May 18 '15 at 7:31
Many good questions generate some degree of opinion based on expert experience, but answers to this question will tend to be almost entirely based on opinions, rather than facts, references, or specific expertise. If this question can be reworded to fit the rules in the help center, please edit the question.
The first question is likely a better fit for the Personal Finance stack exchange. For the second question, the answer is always: as many as you can get without scuppering the deal entirely. From what you've said, this will not work without both parties; as such, how much can you get for yourself while still giving them enough that it makes financial sense for them? That's how much you ask for.
– wolfPack88
May 16 '15 at 22:31
We can't answer this as it's entirely your choice on how you wish to manage risk against reward. Voting to close.
– Jane S♦
May 17 '15 at 1:24
suggest improvements |Â
up vote
-1
down vote
favorite
up vote
-1
down vote
favorite
A few years ago I worked for a software company which paid me an average salary. While there I had an idea for an internal project which greatly reduced costs, and emphasized my employers such project had the potential to become a product, and expand revenues. They agreed on that, but delayed the project in favor of the current "cash cows". I eventually left the company since the technical challenge was not up to my taste any more (unlike the idea I had).
Now they approached me again, asking whether I prefer to work again on a fixed-pay basis or get shares on that project. I'm strongly inclined to ask for shares.
Besides having the idea I coded about 99% of the project during 6 months. It's totally usable inside the company, but I estimate at least 6 more months are necessary to turn that into a real product.
I have two questions:
Supposing I know the expected cash flows of the hypothetical product in the following years, how do I establish a minimum amount of shares that would offset the advantages of working for a fixed pay?
How much shares would be fair asking for? They depend on me on the technical side; I depend on them on the marketing/sales side.
software-industry job-offer equity
asked May 16 '15 at 19:46
Rômulo C
1013
A few years ago I worked for a software company which paid me an average salary. While there I had an idea for an internal project which greatly reduced costs, and emphasized my employers such project had the potential to become a product, and expand revenues. They agreed on that, but delayed the project in favor of the current "cash cows". I eventually left the company since the technical challenge was not up to my taste any more (unlike the idea I had).
Now they approached me again, asking whether I prefer to work again on a fixed-pay basis or get shares on that project. I'm strongly inclined to ask for shares.
Besides having the idea I coded about 99% of the project during 6 months. It's totally usable inside the company, but I estimate at least 6 more months are necessary to turn that into a real product.
I have two questions:
Supposing I know the expected cash flows of the hypothetical product in the following years, how do I establish a minimum amount of shares that would offset the advantages of working for a fixed pay?
How much shares would be fair asking for? They depend on me on the technical side; I depend on them on the marketing/sales side.
software-industry job-offer equity
asked May 16 '15 at 19:46
Rômulo C
1013
asked May 16 '15 at 19:46
Rômulo C
1013
asked May 16 '15 at 19:46
Rômulo C
1013
asked May 16 '15 at 19:46
Rômulo C
1013
1013
closed as primarily opinion-based by Jane S♦, scaaahu, gnat, Michael Grubey, yochannah May 18 '15 at 7:31
Many good questions generate some degree of opinion based on expert experience, but answers to this question will tend to be almost entirely based on opinions, rather than facts, references, or specific expertise. If this question can be reworded to fit the rules in the help center, please edit the question.
closed as primarily opinion-based by Jane S♦, scaaahu, gnat, Michael Grubey, yochannah May 18 '15 at 7:31
Many good questions generate some degree of opinion based on expert experience, but answers to this question will tend to be almost entirely based on opinions, rather than facts, references, or specific expertise. If this question can be reworded to fit the rules in the help center, please edit the question.
The first question is likely a better fit for the Personal Finance stack exchange. For the second question, the answer is always: as many as you can get without scuppering the deal entirely. From what you've said, this will not work without both parties; as such, how much can you get for yourself while still giving them enough that it makes financial sense for them? That's how much you ask for.
– wolfPack88
May 16 '15 at 22:31
We can't answer this as it's entirely your choice on how you wish to manage risk against reward. Voting to close.
– Jane S♦
May 17 '15 at 1:24
suggest improvements |Â
The first question is likely a better fit for the Personal Finance stack exchange. For the second question, the answer is always: as many as you can get without scuppering the deal entirely. From what you've said, this will not work without both parties; as such, how much can you get for yourself while still giving them enough that it makes financial sense for them? That's how much you ask for.
– wolfPack88
May 16 '15 at 22:31
We can't answer this as it's entirely your choice on how you wish to manage risk against reward. Voting to close.
– Jane S♦
May 17 '15 at 1:24
The first question is likely a better fit for the Personal Finance stack exchange. For the second question, the answer is always: as many as you can get without scuppering the deal entirely. From what you've said, this will not work without both parties; as such, how much can you get for yourself while still giving them enough that it makes financial sense for them? That's how much you ask for.
– wolfPack88
May 16 '15 at 22:31
The first question is likely a better fit for the Personal Finance stack exchange. For the second question, the answer is always: as many as you can get without scuppering the deal entirely. From what you've said, this will not work without both parties; as such, how much can you get for yourself while still giving them enough that it makes financial sense for them? That's how much you ask for.
– wolfPack88
May 16 '15 at 22:31
We can't answer this as it's entirely your choice on how you wish to manage risk against reward. Voting to close.
– Jane S♦
May 17 '15 at 1:24
We can't answer this as it's entirely your choice on how you wish to manage risk against reward. Voting to close.
– Jane S♦
May 17 '15 at 1:24
suggest improvements |Â
1 Answer
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Supposing I know the expected cash flows of the hypothetical product in the following years, how do I establish a minimum amount of shares that would offset the advantages of working for a fixed pay?
I think you are looking at it the wrong way. If they are creating a new organization and want you to be a part of it, you should own a fair proportion of it. The salary you take out of it is a separate discussion.
Do not just take shares unless you have another income source. If you get just shares and no salary, it could be years before the company is profitable and you still need an income to eat, pay the rent, etc.
Regarding salary, as a co-founder and co-owner you should probably take a reasonable minimum salary until the product is profitable, in which case you and your co-owners can decide when to take more.
Before agreeing to any amount, I would ask to see the legal documents around the company, including who owns it, whether the accounts are in good standing, what debts the company has, etc. While you are unlikely to be the majority shareholder, you are going into business with the people that are and you need to trust them. Get agreements about what access you will have to the financial records and information, that you will be involved in decisions and so on.
That said, it sounds like the existing owners are being quite reasonable offering you shares. Most software development organizations require developers to sign over any intellectual property relating to their work, so the existing owners have no legal obligation to offer you anything.
I would also discuss how the development is going to be managed. For example, if it is a separate organization, are there going to be dedicated development teams but a shared marketing/sales team? If so, will the new organization be paying part of the other's marketing/sales budget. Any form of dependency is a risk and a way the other co-owners could screw you.
How much shares would be fair asking for? They depend on me on the technical side; I depend on them on the marketing/sales side.
Assuming it is a new company, I would ask for an 50/50 split if there are two owners or about 30%-40% yours otherwise. They will probably want to talk you down but see how it goes. If it is shares in the existing company, it will likely be much smaller, depending on the company valuation and the likely value of the new product.
Your key negotiating tactic here is emphasizing how much of the product you have written while not in their employment. This is code you own and not them. Presumably, you would need to transfer the code or a license to use it and derive products from it to the new organization.
That said, remember most new products fail. This is nothing to do with you, the quality of your code or the company. Things just do so. Forgive me for being skeptical but the cash flows they have shown you could be inflated, too. Therefore, push for a greater proportion if you can.
If you want more or specific advice, find a good accountant or someone that works with startups. They can help guide you through the equity split and planning discussions while helping you come up to speed with the greater responsibilities of being a co-owner.
answered May 17 '15 at 8:07
akton
5,4811732
suggest improvements |Â
1 Answer
1
active
oldest
votes
1 Answer
1
active
oldest
votes
active
oldest
votes
active
oldest
votes
up vote
3
down vote
accepted
Supposing I know the expected cash flows of the hypothetical product in the following years, how do I establish a minimum amount of shares that would offset the advantages of working for a fixed pay?
I think you are looking at it the wrong way. If they are creating a new organization and want you to be a part of it, you should own a fair proportion of it. The salary you take out of it is a separate discussion.
Do not just take shares unless you have another income source. If you get just shares and no salary, it could be years before the company is profitable and you still need an income to eat, pay the rent, etc.
Regarding salary, as a co-founder and co-owner you should probably take a reasonable minimum salary until the product is profitable, in which case you and your co-owners can decide when to take more.
Before agreeing to any amount, I would ask to see the legal documents around the company, including who owns it, whether the accounts are in good standing, what debts the company has, etc. While you are unlikely to be the majority shareholder, you are going into business with the people that are and you need to trust them. Get agreements about what access you will have to the financial records and information, that you will be involved in decisions and so on.
That said, it sounds like the existing owners are being quite reasonable offering you shares. Most software development organizations require developers to sign over any intellectual property relating to their work, so the existing owners have no legal obligation to offer you anything.
I would also discuss how the development is going to be managed. For example, if it is a separate organization, are there going to be dedicated development teams but a shared marketing/sales team? If so, will the new organization be paying part of the other's marketing/sales budget. Any form of dependency is a risk and a way the other co-owners could screw you.
How much shares would be fair asking for? They depend on me on the technical side; I depend on them on the marketing/sales side.
Assuming it is a new company, I would ask for an 50/50 split if there are two owners or about 30%-40% yours otherwise. They will probably want to talk you down but see how it goes. If it is shares in the existing company, it will likely be much smaller, depending on the company valuation and the likely value of the new product.
Your key negotiating tactic here is emphasizing how much of the product you have written while not in their employment. This is code you own and not them. Presumably, you would need to transfer the code or a license to use it and derive products from it to the new organization.
That said, remember most new products fail. This is nothing to do with you, the quality of your code or the company. Things just do so. Forgive me for being skeptical but the cash flows they have shown you could be inflated, too. Therefore, push for a greater proportion if you can.
If you want more or specific advice, find a good accountant or someone that works with startups. They can help guide you through the equity split and planning discussions while helping you come up to speed with the greater responsibilities of being a co-owner.
answered May 17 '15 at 8:07
akton
5,4811732
suggest improvements |Â
up vote
3
down vote
accepted
Supposing I know the expected cash flows of the hypothetical product in the following years, how do I establish a minimum amount of shares that would offset the advantages of working for a fixed pay?
I think you are looking at it the wrong way. If they are creating a new organization and want you to be a part of it, you should own a fair proportion of it. The salary you take out of it is a separate discussion.
Do not just take shares unless you have another income source. If you get just shares and no salary, it could be years before the company is profitable and you still need an income to eat, pay the rent, etc.
Regarding salary, as a co-founder and co-owner you should probably take a reasonable minimum salary until the product is profitable, in which case you and your co-owners can decide when to take more.
Before agreeing to any amount, I would ask to see the legal documents around the company, including who owns it, whether the accounts are in good standing, what debts the company has, etc. While you are unlikely to be the majority shareholder, you are going into business with the people that are and you need to trust them. Get agreements about what access you will have to the financial records and information, that you will be involved in decisions and so on.
That said, it sounds like the existing owners are being quite reasonable offering you shares. Most software development organizations require developers to sign over any intellectual property relating to their work, so the existing owners have no legal obligation to offer you anything.
I would also discuss how the development is going to be managed. For example, if it is a separate organization, are there going to be dedicated development teams but a shared marketing/sales team? If so, will the new organization be paying part of the other's marketing/sales budget. Any form of dependency is a risk and a way the other co-owners could screw you.
How much shares would be fair asking for? They depend on me on the technical side; I depend on them on the marketing/sales side.
Assuming it is a new company, I would ask for an 50/50 split if there are two owners or about 30%-40% yours otherwise. They will probably want to talk you down but see how it goes. If it is shares in the existing company, it will likely be much smaller, depending on the company valuation and the likely value of the new product.
Your key negotiating tactic here is emphasizing how much of the product you have written while not in their employment. This is code you own and not them. Presumably, you would need to transfer the code or a license to use it and derive products from it to the new organization.
That said, remember most new products fail. This is nothing to do with you, the quality of your code or the company. Things just do so. Forgive me for being skeptical but the cash flows they have shown you could be inflated, too. Therefore, push for a greater proportion if you can.
If you want more or specific advice, find a good accountant or someone that works with startups. They can help guide you through the equity split and planning discussions while helping you come up to speed with the greater responsibilities of being a co-owner.
answered May 17 '15 at 8:07
akton
5,4811732
suggest improvements |Â
up vote
3
down vote
accepted
up vote
3
down vote
accepted
Supposing I know the expected cash flows of the hypothetical product in the following years, how do I establish a minimum amount of shares that would offset the advantages of working for a fixed pay?
I think you are looking at it the wrong way. If they are creating a new organization and want you to be a part of it, you should own a fair proportion of it. The salary you take out of it is a separate discussion.
Do not just take shares unless you have another income source. If you get just shares and no salary, it could be years before the company is profitable and you still need an income to eat, pay the rent, etc.
Regarding salary, as a co-founder and co-owner you should probably take a reasonable minimum salary until the product is profitable, in which case you and your co-owners can decide when to take more.
Before agreeing to any amount, I would ask to see the legal documents around the company, including who owns it, whether the accounts are in good standing, what debts the company has, etc. While you are unlikely to be the majority shareholder, you are going into business with the people that are and you need to trust them. Get agreements about what access you will have to the financial records and information, that you will be involved in decisions and so on.
That said, it sounds like the existing owners are being quite reasonable offering you shares. Most software development organizations require developers to sign over any intellectual property relating to their work, so the existing owners have no legal obligation to offer you anything.
I would also discuss how the development is going to be managed. For example, if it is a separate organization, are there going to be dedicated development teams but a shared marketing/sales team? If so, will the new organization be paying part of the other's marketing/sales budget. Any form of dependency is a risk and a way the other co-owners could screw you.
How much shares would be fair asking for? They depend on me on the technical side; I depend on them on the marketing/sales side.
Assuming it is a new company, I would ask for an 50/50 split if there are two owners or about 30%-40% yours otherwise. They will probably want to talk you down but see how it goes. If it is shares in the existing company, it will likely be much smaller, depending on the company valuation and the likely value of the new product.
Your key negotiating tactic here is emphasizing how much of the product you have written while not in their employment. This is code you own and not them. Presumably, you would need to transfer the code or a license to use it and derive products from it to the new organization.
That said, remember most new products fail. This is nothing to do with you, the quality of your code or the company. Things just do so. Forgive me for being skeptical but the cash flows they have shown you could be inflated, too. Therefore, push for a greater proportion if you can.
If you want more or specific advice, find a good accountant or someone that works with startups. They can help guide you through the equity split and planning discussions while helping you come up to speed with the greater responsibilities of being a co-owner.
answered May 17 '15 at 8:07
akton
5,4811732
Supposing I know the expected cash flows of the hypothetical product in the following years, how do I establish a minimum amount of shares that would offset the advantages of working for a fixed pay?
I think you are looking at it the wrong way. If they are creating a new organization and want you to be a part of it, you should own a fair proportion of it. The salary you take out of it is a separate discussion.
Do not just take shares unless you have another income source. If you get just shares and no salary, it could be years before the company is profitable and you still need an income to eat, pay the rent, etc.
Regarding salary, as a co-founder and co-owner you should probably take a reasonable minimum salary until the product is profitable, in which case you and your co-owners can decide when to take more.
Before agreeing to any amount, I would ask to see the legal documents around the company, including who owns it, whether the accounts are in good standing, what debts the company has, etc. While you are unlikely to be the majority shareholder, you are going into business with the people that are and you need to trust them. Get agreements about what access you will have to the financial records and information, that you will be involved in decisions and so on.
That said, it sounds like the existing owners are being quite reasonable offering you shares. Most software development organizations require developers to sign over any intellectual property relating to their work, so the existing owners have no legal obligation to offer you anything.
I would also discuss how the development is going to be managed. For example, if it is a separate organization, are there going to be dedicated development teams but a shared marketing/sales team? If so, will the new organization be paying part of the other's marketing/sales budget. Any form of dependency is a risk and a way the other co-owners could screw you.
How much shares would be fair asking for? They depend on me on the technical side; I depend on them on the marketing/sales side.
Assuming it is a new company, I would ask for an 50/50 split if there are two owners or about 30%-40% yours otherwise. They will probably want to talk you down but see how it goes. If it is shares in the existing company, it will likely be much smaller, depending on the company valuation and the likely value of the new product.
Your key negotiating tactic here is emphasizing how much of the product you have written while not in their employment. This is code you own and not them. Presumably, you would need to transfer the code or a license to use it and derive products from it to the new organization.
That said, remember most new products fail. This is nothing to do with you, the quality of your code or the company. Things just do so. Forgive me for being skeptical but the cash flows they have shown you could be inflated, too. Therefore, push for a greater proportion if you can.
If you want more or specific advice, find a good accountant or someone that works with startups. They can help guide you through the equity split and planning discussions while helping you come up to speed with the greater responsibilities of being a co-owner.
answered May 17 '15 at 8:07
akton
5,4811732
answered May 17 '15 at 8:07
akton
5,4811732
answered May 17 '15 at 8:07
akton
5,4811732
answered May 17 '15 at 8:07
akton
5,4811732
5,4811732
suggest improvements |Â
suggest improvements |Â
The first question is likely a better fit for the Personal Finance stack exchange. For the second question, the answer is always: as many as you can get without scuppering the deal entirely. From what you've said, this will not work without both parties; as such, how much can you get for yourself while still giving them enough that it makes financial sense for them? That's how much you ask for.
– wolfPack88
May 16 '15 at 22:31
We can't answer this as it's entirely your choice on how you wish to manage risk against reward. Voting to close.
– Jane S♦
May 17 '15 at 1:24