Equity Levels
So i get asked all the time to be partners in businesses. It’s funny but people I’ve never met and people I just meet offer me half of their companies all the time. I wouldn’t offer myself half of my company but go figure. Of course, I turn everyone down unless I know them or they come from a personal referral. In addition, when I accept equity, I never take a full share even if its offered. Now, you’re probably saying “why would this idiot leave money on the table?”
It’s pretty simple, my role is to play architect. Once the startup is up and running my role is just occasional strategy and biz dev intros. It’s not heavy lifting and i’m not deeply involved. If i accepted a full stake, the entrepreneur would thank me for the first 3 months and then hate my guts and think i’m a greedy bastard for taking half and not doing work anymore. It is irrelevant if they were the ones that offered that to me in the first place and it does not matter if i carefully explained what I do. I would much rather collect smaller stakes in happy companies than largest stakes in unhappy ones. Considering most of the work I’m getting equity for, I would probably do for free just if they asked, I consider it a blessing so I try to be nice.
This can be extrapolated to investors. A lot of times investors try to get as much as possible. This isn’t always the best thing to do. Even if your founder is an arrogant prick, you still want him involved, maybe not as CEO but it really is never smart to get rid of the energy that started the company 100%….okay maybe sometimes but in general you want the guy or gal around. Usually the founder is a horrible CEO but could be a great innovator. The innovator is more important long term so I caution investors out there to be fair with your terms and equity because even if an entrepreneur says thank you, they may still hate your guts.
