What do you mean by "operating"? You could well be right but there is no hackin or anything going on here, its more the founders going round looking for customers and creating relationships with strategic partners etc. There are no contracts signed yet, no shareholders invested yet. Don't get me wrong, I am not trying to discount in anyway what they have done, I am just trying to get to a situation where I can understand the best way to "value" what I am being offered a stake in, so I can compare what they are offering me against their stake.

We hackers like to underestimate the amount of work involved in finding customers and creating relationships.

18 months of their efforts within their expertise is 18 months regardless of whether it is hacking :)

18 months of 50% effort at no salary = 9 months full time no salary. Why do you think a 21% gap is too high for that?

Again: 4% is a very large share for an employee. When the company comes to its senses, nobody else is going to get anything even in that neighborhood.

4% isn't in any way an unreasonable share for a first or second hire, especially when they're asking you to take no salary.

I agree, it's not unreasonable. Just high.

Thanks for this.

We're still in early discussions. No it wouldn't be preferred stock, just ordinary. They seem to be proposing that a shareholders agreement will contract for my stake to be protected, but, as you know, a VC will restructure all the shareholders if it wants to, so that doesn't work.

My calculations are based around a sale value of around £50million to £90million in about 5 years which at 2% would make my stake worth £1million in 5 years time (if £50mill sale price) but that assumes I don't get diluted below 2% etc and that is why I think it is a too low % stake for me to accept since it would only give me double the salary I could otherwise earn over the same period.

Okay, then it's easy ...don't take the job!

I don't think you can make that assumption unless you have preferred stock.

Thanks, this is useful and gives me a better perspective.

Yeah, I am trying to negotiate a bigger stake but with dilution.

None of the founders have been working on this full time over the last 18 months, I would say about 50% of their time, it is only now that everyone is coming on board full time. We have lots of customers knocking on the door for the product which is down to them. I am being told the figures being presented to VCs indicate the company may be worth about £6m today, though we have no contracts in place yet.

If funding comes in, we will all have some salary, albeit well below market rate, which I suppose is fine, its a start-up. Why is 8% high for a late joiner?

Because the people who came before you have mitigated a lot of the risk.

As a lawyer, I would advise you to consider your options with an accountant or lawyer

Hi - is your business based in the UK or in London?

Crikey what is "boolean"? I thought my law books were complicated!

Thanks for taking tiem to reply. The humour cheered me up!

Thankyou too.