anotheruser — 2011-06-07T21:19:54-04:00 — #1
Im a developer and i have a web-based business that is starting to gain traction. More and more strategies and marketing stuff need to get done and I've decided to just concentrate on development and seek the help of another person who will do the business side of the operation.
What is the best way to get help? should I get a CEO right away? What is the common practice when hiring a CEO in terms of what percentage (company share) to give him/her, or is giving away a percentage ownership of the company always assumed?
sagewing — 2011-06-07T21:49:16-04:00 — #2
It's not that easy to just 'get a CEO', especially with a small company. A CEO doesn't really handle marketing, they would be more of a leadership and strategy role for a large organization as well as a rainmaker and public face. If you are just 'starting to get traction' it may not be worth paying millions of dollars for a hotshot CEO
What is it, exactly, that you need to be done for the business? If you want marketing, look for a marketing pro. If you want someone to handle the business side of things, look for a lower level person who is familiar with startups and would consider a joint venture.
Whether a % of the company is required depends on how deep your pockets are. I will be your CTO for equity-only for a big percentage of a company that is very promising, and I will be a CTO for cash-only if you write me a big enough check.
One thing is for sure, if you want to attract seasoned business talented you'll have to offer something substantial.
anotheruser — 2011-06-08T10:25:09-04:00 — #3
Thanks Sagewing, very informative! ok, IF i give away a little %, how would i protect the company from this new partner (a CEO or a business expert) should he mess up his role? don't want him to keep some ownership of the company if he's not doing his part good enough. I've heard a little about vesting, is this where it comes in? Can you anyone provide an example or how-to scenario, thanks much...
sagewing — 2011-06-08T12:38:03-04:00 — #4
Those issues aren't that hard to deal with. You can write a deal with someone that only grants the equity under certain conditions i.e. performance benchmarks, etc.
But, it kind of seems like you are looking at this the wrong way. You said that your business is just gaining traction, and you mentioned giving away just a little percent of the company. Unless you have a fantastic and unique business coming along, I wouldn't worry about someone messing up as much as I would worry about how you are going to attract anyone at all with a small percent of a small company that is just gaining traction.
What, exactly, are you offering that is going to attract someone good? What is so great about your company that someone would work for a small percent of it? Would you offer any cash? What is this person supposed to do exactly?
anotheruser — 2011-06-08T18:20:36-04:00 — #5
I get where you're coming from sagewing, those are important considerations which I intend to tackle one a a time. For the sake or discussion, let's assume someone accepts my proposition, can you cite a examples of a reasonable list of conditions that the new guy has to deliver (to be stated on paper) before he actually formally gets the % aggreed upon? Like, company must earn 1 million in first X months or else blah blah blah
sagewing — 2011-06-08T18:55:56-04:00 — #6
It's hard to really give you an idea of what the conditions would be because you are sort of thinking of it in reverse. What matters is the value of what YOU have, and what YOU have to offer to someone else. Only when you have a clear understanding of that value can you even consider it.
Think of it from the perspective of the person you are trying to attract. That person has already had success in business, presumably. They are probably doing well financially, right? They probably have other offers and business opportunities available to them, right?
So, why should they help your little business? Why should they even pick up the phone? And really, why should they consider any kind of 'conditions' they they have to deliver before they get equity when you haven't put any value out there?
I get inquiries like this a lot. Things like, "Hi we have this great idea, will you be the CTO for equity in the company?". The answer is always the same: send me a one page overview of the business and I'll let you know. To date, I haven't worked with anyone for equity only.
The reason is that there are great business ideas all over the place. Literally all over the place - there are so many that a 'great idea' isn't worth much and someone who is qualified and experienced is going to gravitate towards deals that are much more developed. When my phone rings and I learn about a startup that has a great idea, an application in beta, a killer team of development/marketing/sales and an awesome marketing strategy that they just need to get funded, now that gets my attention.
So to answer your question, we'll need to know what is going on on your end of the deal. Otherwise it's just not meaningful. Or, I could answer it like this:
If you have a decent idea for a decent business that would make a bit of money then you will have to offer lots and lots of equity to interest good people, and you won't be able to put lots of conditions around them. You will be lucky to get any good interest unless you throw $100k into the mix!
If you have a super hot business with a great team, seed funding, a product in beta, a bunch of partnerships coming together and an already running marketing plan with a venture cap company getting ready to pump the company full of cash - then you barely have to offer anything and you can put lots of performance conditions in the contract.
Most startups have little to offer, and fail over time. Some do great! Which are you? What do you have to offer to someone like me?
anotheruser — 2011-06-09T12:43:52-04:00 — #7
you're a rockstar sage, i totally get it now!