I’m bringing the business leadership to a technical cofounder who has agreed to bring me on as CEO.
Does anyone know of resources for industry standards for the fair equity split that he would give me?
The company is almost pre-revenue. There are a few customers but nothing systematic. There is no salary, so the role is very close to Co-Founder.
I don't have an answer for you and in fact I am in a similar situation but reverse. I am the Founder and CEO taking on a technical cofounder. However, I have heard that the book Slicing Pie is an excellent resource in this regard. I just ordered my copy yesterday. Read up on some of the reviews.
I am a co-founder CEO with an Equity compensation plan. I endorse Tim Huelskamp suggestion to look at and become familiar with Mike Moyers "Slicing the Pie" methodology. It is a solution for a lot of fixed equity split nightmares.
Dynamic equity splits are the fairest approach for all parties now and in the future.
Craig, I would be up to help but honestly, stop looking for a technical co-founder. Start coding in your free time there are many resources on Internet that'll help you learn the best of coding without prior CS/IT knowledge.
If you're starting a site go for Wordpress and collect emails through mailchimp, it's beginner friendly and doesn't require any coding experience at all.
If you want an attractive website and not a Wordpress one. Choose one platform among many consisting of Squarespace, Weebly, & Wix. If you wanna sell online, use Shopify. (If you're up for Shopify, i'll guide you through as I'm already operating a business on it).
Still if you want someone to code for you, hire a freelancer and ask your technical friend to help you out with how much average time would it take to complete the code.
The best part of doing all of this?
No NDAs to “tell you my idea”.
Be conservative with your equity. One of the easiest ways to scare off a technical co-founder is to offer 50% of your company in an initial email or meeting. Freelancers in particular take this as a sign of your trying to get free labor. 50% of nothing is still nothing.
Early on, ask for advice rather than employment. You’re better off getting your foot in the door with good people than alienating them with a hard-sell approach. Share your progress, ask good questions and keep in touch. :)
I have been in this situation. Stand back from the personal point of view and look at it as an outside investor would: They invest in teams, not technology and need to know the right incentives are in place to keep leadership at the firm. They know the technology will change, revenues early will be elusive and sparse, so a CEO that can drive vision, mission, and ambition is key to success. This is the person ultimately responsible for all the bad and good decisions while minimizing the drama and distractions, grasps the nuances (including the mundane of all strategy including sales, marketing, finance, accounting, IP, HR, legal, among others) of the business that exists only to support the technology, and with the ability to change (and sell that change) the direction when needed, build and promote the story, and inspire the team. Legend has it 9 of 10 startups fail to get funded. If true, 5 of those 9 fail because the company cannot tell a story or build confidence that leadership has the tools and grasp of reality (versus "really cutting edge technology" that may never generate revenue) to evolve the product/market fit when needed. A CEO with no current income and no vested equity is a flight risk. In an equity-only startup, they need to know that the CEO, assuming this is a person that has moved the company from pre-to-current revenue, responsible for all a CEO tasks and backed up with the skills to perform them, needs to have strong ties to the firm. This does not have to be vested equity at the outset, although there should be an offset for you should the controlling shareholders change their mind (meaning, if you do not vest equity, they owe you cash at termination - this can be an "accrued salary" format) but it has to be meaningful to give comfort to outsiders you will be there when things get rough, because they will get rough. You also need to be very clear when you do start getting salary, if even modest. If not, particularly if you are not controlling a Board, you can be cannon fodder. A mistake I made once was not insisting to be a permanent member of the Board as CEO. This was a bad decision (among others) on my part.
Does the founder want you as a co-founder or an employee? This would answer your 'range' of equity. You say the company is pre-revenue but "there are a few customers". Customers are only 'customers' if they pay you, beta testing a concept is something very different. No financial commitment, but potential customers. Without any commitment of revenue, only a concept being tested, and a founder that wants a partner: 60/40 is a start. If the founder wants to hire a CEO to operate the company, 20% is a start. Lots of other questions remain regarding potential funding dilutions and benefits.
"The company is almost pre-revenue. There are a few customers but nothing systematic. There is no salary, so the role is very close to Co-Founder." This does not sound very promising.
The equity split is one of the most important decisions - and fairness based on the cofounder contributions is absolute key. Slicing Pie is a great solution for the pre-revenue bootstrapped startups. Problem with most other 'standards' are that the fair split is very dependent on the future contributions that are difficult to forecast and depend on the value (expertise, experience, cash, access to network, previous startup experience) that the cofounders bring. The fact that there is no salary - i.e. you are taking substantial risk equal to co-founder - is a very strong argument for significant equity stake. I go more into detail on the typical considerations in Cofounding The Right Way.