How much equity should a CTO ask for?
I've been working for a startup as employee #3 with unofficial CTO title, getting a full salary though, but I feel like I deserve some equity in the company?
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This is one of the top questions I hear from founders. Being a co-founder is great, and it’s especially awesome when you get to start with a brand new company. But if you’re going to be working for free, or at least at a very low salary, there are some things you should remember regarding your shares.
First of all, If you’re working for no salary, then you may as well be a co-founder, as any business that can’t afford its key personnel is a venture that might not pay off. So we should be talking about 25-35% here, depending on your resources investment into this company.
Second of all, if you’re getting a full salary, then at most you should be entitled to 10% of the company.
Also, you need to make sure that the founders aren’t just saying you’re a co-founder to make themselves feel better about taking advantage of your labor: are you actually listed in the company’s paperwork? As a CTO you are responsible for the whole product delivery, and it makes sense to have you in the documents also. Do you have an ownership stake in the company, or some written form of agreement how the shares will be distributed?
Are there other co-founders who are being paid salaries but not getting equity? If so, then it might not be a good idea to work for free; those other co-founders may well end up owning the majority of the company come time for an exit.