Startup Equity Allocation

[Colby S]

There is a startup that I am a part of, I am the fifth member on the team. However I am beginning to wonder as to whether I am entitled to receive any equity or not. Also, how should I ask to make sure I am indeed receiving a stake when I am putting in a lot of work.

 

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[Glorydog]

That's probably something you should have worked out before joining the team. I mean, I for one would ask "Hey man, when am I getting PAID?"

 

[jmusic]

Typically, if you're actually a partner, you should have some agreement on shares of stock, voting rights, etc.

 

[Austin Hughes]

I am in the exact same position as you right now, except it is just me and another girl who is my partner.
With every step we take in the business, and the more work I put in, the more she pushes me out, little by little.
Language such as "they're going to help ME" instead of "US" indicates that she thinks I am just helping her business, not acting as a partner. Also, when she says "thank you, I appreciate it" for work that I am doing, it indicates that I am helping HER, not US.

If language like this is coming up from your partners, be weary. You're in luck if the situation is like mine, where no legal structure and equity contract has officially cut you out. This way there's still time for you to get your piece of the pie for what you're doing.
To combat this, what I am doing, and what you could do is to analyze the value that you bring to the business personally. Find the areas that would not be there if you hadn't put them there. Find the areas in which the business would be lacking if you weren't there. Then, when the time feels right, show your partners what value you bring to the table. Make them want you to be a part and more so, WANT you NOT to leave.
The objective of this is to get an agreement (preferably signed) and get them while their emotions are involved. Even if your case is made by analytical numbers to show your value.

 

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[jmusic]

I am in the exact same position as you right now, except it is just me and another girl who is my partner.
With every step we take in the business, and the more work I put in, the more she pushes me out, little by little.
Language such as "they're going to help ME" instead of "US" indicates that she thinks I am just helping her business, not acting as a partner. Also, when she says "thank you, I appreciate it" for work that I am doing, it indicates that I am helping HER, not US.

If language like this is coming up from your partners, be weary. You're in luck if the situation is like mine, where no legal structure and equity contract has officially cut you out. This way there's still time for you to get your piece of the pie for what you're doing.
To combat this, what I am doing, and what you could do is to analyze the value that you bring to the business personally. Find the areas that would not be there if you hadn't put them there. Find the areas in which the business would be lacking if you weren't there. Then, when the time feels right, show your partners what value you bring to the table. Make them want you to be a part and more so, WANT you NOT to leave.
The objective of this is to get an agreement (preferably signed) and get them while their emotions are involved. Even if your case is made by analytical numbers to show your value.

I'm not sure if you should call yourself "lucky." At this point, you have no agreement. I'd say don't do this "when the time is right," DO IT NOW. Get it in writing. You could end up being pushed out and getting nothing but the shaft after all your hard work. While you wouldn't be able to collect on past work, at least you wouldn't "throw good time after bad."

 

[Charmander]

I am beginning to wonder as to whether I am entitled to receive any equity or not.

No. Unless you have a valid legal document claiming you have an equity stake in that company, then no, you are not entitled to anything.

"Hey man, when am I getting PAID?"

Unfortunately, you do not have control, a key element that will determine when you are getting paid(or if you even are).

With that being said, you should ask for the equity stake. If you don´t get it, then DEMAND a legal agreement that you will work for atleast a specified sum of money.

 

[ZCP]

What type of entity is the company?

 

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[Glorydog]

No. Unless you have a valid legal document claiming you have an equity stake in that company, then no, you are not entitled to anything.

Unfortunately, you do not have control, a key element that will determine when you are getting paid(or if you even are).

Whoever controls a business can force its sale. Whoever controls a business can implement a merger. Whoever controls a business can fire you. Whoever controls a business, even by a pitiful 1 per cent, is likely to take a great deal more money out of it than the minority shareholders. Remember, too, that in both private and public companies, not all shares are necessarily equal, either in voting power or financial value.
________________
The Law of Victims says you can’t be a victim if you don’t relinquish power to someone capable of making you a victim. When you bequeath control to others, you essentially become a hitchhiker with no seat belt. You take the passenger seat in a stranger’s car, which could be murderous to your financial plan.

With that being said, you should ask for the equity stake. If you don´t get it, then DEMAND a legal agreement that you will work for atleast a specified sum of money.

Not to sound like a jerk, but which part was a response to me? If it's just the one line, why would you join in a partnership in which you had 0 control and make no money? These types of things should have been discussed beforehand, before any work was done whatsoever.

 

[Charmander]

but which part was a response to me?

It was to him(if he would say what you quoted...) - i just quoted that.

 

[Glorydog]

It was to him(if he would say what you quoted...) - i just quoted that.

Oh, I see. That all makes a lot more sense now.

 

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[Vigilante]

1. Do you take a salary, like an employee?
2. Was there a discussion on the front side about equity?
3. Do they refer to you as a partner? Like "we have 5 partners..."
4. On presentations, are you listed as one of the founders?
5. Have you put any money in?

You might be being played as a fool. The longer you work (for free, or no equity, etc...) the more likely it is that it's not what you thought it was. This happens ALL THE TIME and it is perplexing to me.

People get greedy, and the people on the other end of the spectrum make a lot of assumptions.

It's pretty easy to solve.

"Hey, people... when are you going to issue me shares?" Even private companies have shares in the United States.

Make them answer the question. If the answer is NEVER than your last day should be today, or shut your yap, take your salary, and work for what ever you agreed to work for.

 

[Austin Hughes]

I'm not sure if you should call yourself "lucky." At this point, you have no agreement. I'd say don't do this "when the time is right," DO IT NOW. Get it in writing. You could end up being pushed out and getting nothing but the shaft after all your hard work. While you wouldn't be able to collect on past work, at least you wouldn't "throw good time after bad."

I agree with you to not let more work go down the drain. Definitely do it as soon as possible! What I meant by "when the time is right," is to have the equity discussion right after you land a client/order/do something highly valuable that would make them more agreeable.