#AskPS
Piyush Soni .

How much equity is Fair for Unpaid Employees?

So a couple of months back before joining Pushstart, I was being offered equity in a bootstrapped healthcare startup.

Obviously, there are many factors to consider but one piece of the contract really stands out!

They were offering 0.5% vested over 4 years which to me feels low with no salary. However, in the contract, they stipulate a salary when the company is able to pay.

Also, this wouldn’t be a full-time position until the company could pay a salary. I’d be putting in 10-20 hours per week on top of my previous day job.

So, what I wanted to ask is, Is this a standard thing to do?

If so does the 0.5% equity seem reasonable when the company is at least a year away from having any sales and possibly several years before sales are enough to pay all employees?

Originally Posted Here
33 Comments

Jeet Parekh

I think the offer was generous.

Piyush Soni

Man at that time I was not that aware plus the amount of work that I did in the past, I expected a little more from that! I don't know how you feel but 0.5 seems to be too low, this is what I felt at that time!

Chez Kashmiri

Piyush Soni Do they have any revenue? Do they have niche sector/product that you believe will roll in multiple millions under 2 yrs time.

How much have they invested so far .

These are few of the things to understand their size. Obviously .5% of Tesla is all you and your next 3 generations need. 😁😁.

But same can't be said for a dude who just started a company and other than dreams doesn't have anything tangible to showcase

Dheeraj Mehndiratta

There's no particular Answer to this, its about the team you're working with, product u r working on and Growth of the startup which if gives you hope to flow along, you must. If its just another lame start up with no proper planning or good team or no solid planning of earning revenues or having cash in hand anytime soon, then move on.

Piyush Soni

I feel that if given time, that would have grown! Till date also it is at same stage!

If given a choice, would you have taken this offer, or this much equity seems to be too low for you!

Dheeraj Mehndiratta

Then move on. Startup world is too big & fast to keep waiting for one thing to happen unless they making some Rocket ship😁

like i said, I ll chck what's the profile of team i am going to work with, whats the product, is it some real shit or just another lame-ass startup lying around. If team is good and product has some real thing, i d love to work on even 0.20%

Piyush Soni

The product is unique - related to UTI infection detector, Team consisted of only 5 members including me!

Dheeraj Mehndiratta

not team size but profile of team working, what experience they possess or their academics,

Piyush Soni

Dheeraj Mehndiratta Founder was my professor! Co founder was the tech expert and two PHD students were there. I was handling Marketing part.

Dheeraj Mehndiratta

Indeed criteria 1 has been duly checked, now i ll see product and then Their GTM.

Piyush Soni

product was basically a UTI infection detector. Right now in the market, the reports you get after the sample takes 3-4 days to come but this would give you result in 1 day! Downside is the product is little more expensive than present one!\

Rishi Sen

Is the product direct to consumer or to labs/ hospitals clinics?

Dheeraj Mehndiratta

Rishi Sen obv. B2B

Rishi Sen

Nothing obvious about it to me. My question to Piyush Soni was what role were you playing from a marketing perspective. If it was D2C and the team was good it could be a large untapped market and marketing is an important function. You could grow quickly gain valueable experience and .5 is justified (you should push for more though). But if it is B2B then the market is extremely hard to crack and growth cycle is long. Also marketing in B2B diagnostics is basically sales ++ (trade events, Industry meetings etc). B2B 0.5 won't be worth it.

Piyush Soni

Rishi Sen It was B2B! Yes learning probabilities were more but the amount was time I was giving past 4 months in that of my college life was worth more than that!

Rishi Sen

Good call to move on. Diagnostics me TAT reduce karne ka play mainly emergency diagnostics me he. And that too is rather limited. If less cost options exist for UTI detection which take a few more days then that's what industry will use. We need more medical device innovation (which has very long dev cycle then regulatory approvals etc) but incumbents will bury innovators on costs

If you find a consumer diagnostics device firm (e.g. an inito) for UTI detection offering you marketing role then grab 0.5% with both hands and don't let go till it vests. ATB with college

Darshan Mahajan

0.5% vested over 4 years means?

Piyush Soni

Basically 0.5 % equity distributed for next four years.

Darshan Mahajan

acha, okay got it. So a person has to work for atleast 4 years to get 0.5%?

Anaggh Desai

Good decision to move on.

Piyush Soni

Yeah I also felt the same. What do you think should be the minimum offering?

Anaggh Desai

Confirmed salary and the equity. Because the product would be a long time to market. Here they were hedging bets🙂Not that they should not.

Vineet Nandan Gupta

You have to take your call whether to work for Sweat Equity.

I have worked on equity +%age of deal generated as my compensation.... The company is in deep loss and the founder has contemplated closing the company....

At the end of it you have to take the call. Equity is of no value till the time startup receives Series Funding where you can encash your equity..

Piyush Soni

Yeah true I agree. Till now there is no funding and what I feel is now that I had taken the right decision

Shivam Malhotra

4 year vesting for .5% sounds rich.For employees,vesting usually goes around 2-3 years (not sure haven't issued any yet) but I guess you did the right thing considering the stage company was at.I brought a Co Founder later on and his shares are vested over 4 years,hope that gives some respite!

And he has a fixed monthly salary too (not bootsrapped anymore).

Piyush Soni

Yeah I also feel the same thing. Till date they are at the same place! No funding no growth!

Premnath Borkar

First things first, how serious were you with the offer and the work you were doing there, what was that you were getting out of it. Also did you ever thought the idea and team is good enough to make it big one day. Considering all these factors you could take a decision.

Piyush Soni

Yes I was I worked for 6 months without any pay. Did offline online whatever marketing is there. Had given a lot of demos as well. I was trying to tell them a lot of thing which would help them grow bit they were in their own mind. Founder that means, my professor was good. Rest of the members, I feel never existed!

Anjali Jain

I think from an entrepreneur's perspective it's not easy to convince Some one to get on board with equity compensation especially the venture has no funding. Because Why wud any one believe in the idea ? Also wat r the chances of scaling up ??

In myopinion it's not a fair offer.

There is no gain for the team member(s) who is not paid in monetory terms.

There has to be an equal give and take in the organisation to keep the morale of the employees high !

Piyush Soni

Yes exactly! Starting me main bhi josh me tha when I was working without pay. But things change your vision changes. I guess money is a very important part

Chez Kashmiri

Yes very reasonable if the Said company is Tesla, Jio etc.
Otherwise just a scam to rip you off , of your hardwork while building the company with owner .

Sudhir Kumar Sinha

Depend on company and its valuation in market, product & services. Equity offer may vary from company to company.

Akash Agrawal

I would not advise working without salary unless you are one of the co-founders. More than 90% of the startups fail within first 5 years of inception, so you are taking huge risk.

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