Wow this is some serious subject
Callan S. wrote:I'd say it's dumb - say the company got big - then you could do nothing and get 20% of a companies revenue, for the rest of your life? Anyone who writes up a contract like that is not that good with finances to begin with!
Second thing, get a copy of the contract in advance rather than only reading it when they hand it to you/essentially pressure you to read it quickly.
Finally don't find the offer flattering - this is simply a question of investment and you can invest in all sorts of things at any time.
Figure how much you are worth per hour - $20 an hour? $30 an hour? Then figure how many hours you are going to put into this. IMPORTANT: Figure out your 'game over' amount of hours - how many hours do you put in before you cut this project loose? Do not fall into a sunk cost fallacy where since you put in effort you are reluctant to let go of that effort, so you throw even more effort in - make sure to avoid this and have a 'game over' figure. If you haven't been paid enough to make up for each hour by then, you cut the project loose.
I rather suspect your work will be the workhorse of the operation - rather than you getting 20%, it's probably more like them getting 80% of the profits of your labour.
Good luck!
In my country there aren't many web developers on the "loose" and I don't know their payment. Also I'm not flattered but I really think I could down my worth because I have some issues about thinking I'm that good at something.
That game over figure I'll certainly do (in case I accept), but I first need to read the contract word by word, get some conclusions out of it and then see what I win and lose. And If it says I have to stay there for x years I decline on the spot.
Xaos wrote:If it was me, I'd make sure they understand my time commitment first. Student first, business second. Until it gets big, then your priorities can change a bit. Then, make sure you wouldn't be giving away your share if you need to hire more people. That should come from them/their pockets if they agree with you that there is a need to hire. I'd then negotiate on getting some $ or something up-front and taking the 20%, especially if you're only about 40% sure of its success.
And it was me that made a simple site for $200
For a good figure, take a look around your area and see what an average web-manager would make (if that's going to be your role). Estimate how many hours you will be working on the project. How profitable will the business have to be for you to be making that average?
As profability required to meet average wage increases, so should your initial payment
Ahhh nice one with the site
Yeah they are students too and I think they understand that I would not commit 100% at first. I wouldn't accept that 20% for me and my team, and I'm not sure if that's the deal, I just guessed.
Jackolantern wrote:These kinds of deals aren't that uncommon really. They are offering you equity in exchange for your work. Basically, they are asking you to partner with them.
That's exactly what they've told me, they need a co-founder.
Jackolantern wrote:
1. Signing a contract is a big deal. They could put some really ugly stuff in there, and possibly not even intend for it to be bad (so even if you really feel they are great people, read it with a magnifying glass). For example, a time constraint on you would be an automatic deal killer for me. For example, they say they need your help for a minimum of 2 years. On the outset that doesn't sound that crazy. They of course don't want to get screwed either. But contracts to hold employees can so easily turn into a problem. Say they aren't making much money, but issues come up in your life where you need more money and need it fast. You could find yourself in a horrible situation where you are working a day job to make money, and then working all night for them for next-to-nothing to fulfill a contract. A required time of stay should be a deal killer. You should have an option to abandon your equity to leave.
Yeah I will do that, I won't commit to a X years contract because I want the power to leave as soon as I reach my 'game over' figure. (thanks to Callan
)
Jackolantern wrote:
2. You need to know what 20% of the money really means. Companies rarely give "20% of revenue", and if they are, they don't know anything about business and you should run. Equity means "N% of company profit". The reason is because "revenue" means all money coming in. Getting a percent of revenue is called "royalty". Say they sell wooden boards, for example. They buy a certain kind of wooden board for $8 and sell it for $10. If two employees are getting 40% royalty between them, they each take $2 out of that $10, so the net is that the company lost $2 (they only have $6 left out of the $10 revenue from an $8 board). A true equity deal would be 40% of the profits, so each would take $0.40 (20% of profit) from each board. And that assumes there is no overhead to buy and sell the boards.
I'll make sure to see what they mean exactly for the 20%, I don't think it will be revenue, It should be profit, it's more likely.
Jackolantern wrote:
As others have touched on, I would only do it if you really believe in what they are doing. 40% belief is not enough. Programmers are very valuable, and one of the largest expenses for any tech-related company.
If their ideas are just "we are gonna make some apps of some cool stuff and try to make some money", get out of there. If they have an idea that really resonated with you as something with promise, and they have a true vision, then I would consider it.
Their Idea for what they've told me its basically a trading website, but instead of Person to person trading, the Seller sends the product to the buyer, but the buyer sends the money to the company, and the company gives X days so the buyer can say "its okay", if he says that, then the money - commission is forwarded to the seller, else the buyer gets his money back, and the seller gets his product back.
I don't trust the idea 100%... But I'm always thinking on the what if..?
