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Ask Slashdot: How To Ask For Equity In a Startup?

Posted by timothy on from the say-fellas-it's-about-my-passwords dept.

Uncrase writes "I'm a contract software developer, and have been working for a small startup for over a year now. Not a bad position to be in of course. The company consists of a handful of people, all of which (I believe) are contractors (by their own choice), however we're doing very very well and have a very significant revenue already. Call me greedy, but I've worked hard (as the main IT guy essentially) to get the company to where it is now, and of course get paid contractor rates for this. I would like to get some kind of equity (options) in this. The company is continuing to grow its operations and I am basically indispensible for the continuation of this growth. I'm definitely not planning in any way to force a hand, but I would like to know what could be a good way to approach this. I'd essentially like to ask for a raise — being a contractor — but in the form of equity. Any experience with this? Am I completely off here?"

8 of 349 comments (clear)

  1. you're a contractor by Anonymous Coward · · Score: 4, Insightful

    ...and therefore not indispensable ...
    Good luck, you are greedy indeed...

  2. Don't imagine that you're indispensable. by jcr · · Score: 5, Insightful

    If you're charging a rate that you're happy with, then offer to give them a discount for equity. Whatever you do, don't overplay your hand.

    -jcr

    --
    The only title of honor that a tyrant can grant is "Enemy of the State."
    1. Re:Don't imagine that you're indispensable. by Anonymous Coward · · Score: 4, Insightful

      ^^ What jcr said. Also, what's wrong with simply asking how you can be a bigger part of the company?

      However, you also said this:

      however we're doing very very well and have a very significant revenue already.

      If that's the case, you should expect the answer to equity sharing to be "no, we're happy with where the equity positions are at already."

      Additionally, the "price" of equity is inversely proportional to the risk involved. If it's 3 guys just starting up and scraping the cash together month-to-month, equity can be pretty cheap - you can make an offer for a big chunk of equity because you're assuming a big part of the risk. If, as you say, they have significant revenue already, then the equity should be relatively expensive - after all, there's not much risk anymore, and any cash you offer to put in might not be much in comparison to month-to-month revenue.

      As a contractor, you'd probably have to offer a pretty hefty reduction in salary/rate for equity. As a full-time employee, you could probably command more for a lesser price, as you'd essentially be assuming some of the risk - e.g. the risk of being an at-will employee getting sacked if revenue turns south vs. a fixed-length contract.

  3. You were paid to do a job, right? by Anonymous Coward · · Score: 5, Insightful

    You were paid (an evidently fair compensation) to do a job. Kudos for doing it well! That said, as a biz owner myself, we take all the risk which includes employment of contractors from day one when the company was deeply in the red and then pray hard that someday we'll transition to black.

    Be thankful you have a good job and if they offer it, certainly jump on options...but..again, as the owner of three startups, 2 of which are tech related, we take the risk, not you, ergo we take the reward.

    From your perspective, it sucks, I know....I was a contractor for 10 years. From our perspective, it sucks when you ask, because then we have to look at potentially canning you. So, it sucks all around.

  4. Switch to permanent employee by LynnwoodRooster · · Score: 4, Insightful

    And give up the higher contractor wage. That's the deal you make: permanent employee who earns less per hour, but gets a long-term stake in the company, or contractor who makes bigger bucks but nothing in the way of ownership.

    --
    Browsing at +1 - no ACs, I ignore their posts. So refreshing!
  5. Re:You are a contractor by BasilBrush · · Score: 4, Insightful

    Yes, he's a contractor, who risked nothing when the company was starting out. But got paid contractor rates for his work.

    The company owes the greedy bastard nothing.

  6. sign on bonus by wmbetts · · Score: 4, Insightful

    Ask to be moved to a full time employee and tell them you want this because you believe in the company and see it being a huge success. Stroke their ego, but don't lie. They already know what you're worth and there for you're less of a gamble than bringing someone else on and you can still ask for a good market rate. The bonus to this is if you work it right you'll be able to get almost as much as you are now and have taxes taken out and get stock as a sign on bonus. Tell them you're wanting to take a pay cut (because you will have too) in order to get stock as a sign on bonus. It basically costs them nothing and they will save money by paying you a slightly lower hourly rate.

    --
    "Ubuntu" -- an African word, meaning "Slackware is too hard for me". - stolen from Dan C alt.os.linux.slackware
  7. Re:On the other hand... by similar_name · · Score: 4, Insightful

    If you really are indispensable

    No one except the owner is indispensable. It will completely depend on the relationship he has with them. If he's considered a "friend" or "good guy" he might be able to talk his way into something. If he's considered an asset then it's like the copier asking for a raise. A lot of people deride that this is the case or they deride that somebody thinks it's the case but I just think it's human nature and understandable.