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I was asked by a reader how much equity he should give out to early employees and to service providers in a very earlystage startup. Founders vs. Early Employees To help with this discussion, let me start with a definition of "early employee." If the company's valuation is $2 million, $90k is 4.5%.
Other founders, “as a privately held company we don’t disclose our valuation.&# Me, “dude, I’m not a journalist. I just want to figure out what a fair valuation is.&# I figured all the VC’s talked so we should. This starts with understanding how VCs and entrepreneurs often see valuation differently.
Level of responsibility and time allocated. Co-founders only able to work part-time, with responsibility and major income sources elsewhere, don’t carry the same risk as others with more operational responsibility. The CTO of many technical startups was the original founder. Amount of venture funding provided.
A CEO who has “been there and done that” is traction, especially if teamed with a financial lead (CFO) and a product lead (CTO). Intellectual property is a large element of most early-stage company valuations, and this value determines what percent of the company an investor will expect to get for his money.
Level of responsibility and time allocated. Co-founders only able to work part-time, with responsibility and major income sources elsewhere, don’t carry the same risk as others with more operational responsibility. The CTO of many technical startups was the original founder. Amount of venture funding provided.
Level of responsibility and time allocated. Cofounders only able to work part-time, with responsibility and major income sources elsewhere, don’t carry the same risk as others with more operational responsibility. The CTO of many technical startups was the original founder. Amount of venture funding provided.
A CEO who has “been there and done that” is traction, especially if teamed with a financial lead (CFO) and a product lead (CTO). Intellectual property is a large element of most early-stage company valuations, and this value determines what percent of the company an investor will expect to get for his money.
A CEO who has “been there and done that” is traction, especially if teamed with a financial lead (CFO) and a product lead (CTO). Intellectual property is a large element of most early-stage company valuations, and this value determines what percent of the company an investor will expect to get for his money.
Level of responsibility and time allocated. Co-founders only able to work part-time, with responsibility and major income sources elsewhere, don’t carry the same risk as others with more operational responsibility. The CTO of many technical startups was the original founder. Amount of venture funding provided.
A CEO who has “been there and done that” is traction, especially if teamed with a financial lead (CIO) and a product lead (CTO). Intellectual property is a large element of most early-stage company valuations, and this value determines what percent of the company an investor will expect to get for his money.
They were referring to non-founder engineers, most commonly the first hire for technology businesses. However, at the very earlystage, they are taking as much risk with their future as the founders. Every time a startup raises capital, all common shareholders are diluted. Engineer #1?
Level of responsibility and time allocated. Co-founders only able to work part-time, with responsibility and major income sources elsewhere, don’t carry the same risk as others with more operational responsibility. The CTO of many technical startups was the original founder. Amount of venture funding provided.
When you're getting started, sweat equity is often a critical component of your negotiating leverage with co-founders, earlystage employees and others who aren't paid market wages to help you grow your business. Sweat equity is just one component of early-stagevaluation.
In response, venture capital firms like Sequoia and Andreessen/Horowitz are hiring new partners just to work with their portfolio companies and match them to corporations. VCs like acquisitions as much as IPOs because the acquiring companies often can rationalize paying large multiples over the current valuation of the startup.
Smart teams understand quickly that all three skills are essential - if you can't recognize the need, you won't be able to hire for it or value it. The more structured the effort of the 'distribution' people will be, the clearer the communication with design and technical people and the higher mutual respect/valuation.
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