In the enterprise software-as-a-service (SaaS) field, a non-founder CEO is about to join a startup. The company already has two technical co-founders who have been continuously developing a prototype over the past six months and have invested thousands of dollars hiring freelancers to accelerate development. Currently, the product's minimum viable product (MVP) is ready, and this CEO has been invited to serve as the company's business leader.

As CEO, the initial responsibilities will include: bringing in the first batch of test users, expanding new customers, finding investors, and generating revenue. Additionally, the CEO plans to take no salary until investment is secured, while the two technical co-founders currently retain their full-time jobs and plan to transition to full-time commitment after securing investment. The CEO has committed to working at least six hours per day starting immediately.

Based on the above background, a core question arises: at this stage of no salary, no funding, and a completed MVP, how much equity should this non-founder CEO reasonably request?

Key Considerations

When evaluating a reasonable equity percentage, the following dimensions need to be considered:

  • Stage Risk and Contribution:The company is still in its early stages, has not generated revenue, and has not obtained external funding. The CEO bears the core responsibility for business development and fundraising, and their contribution directly affects the company's survival and growth.
  • Salary Sacrifice:The CEO plans to work without pay until funding is secured, which is equivalent to exchanging opportunity cost for equity and should be compensated accordingly.
  • Founder Investment:The technical co-founders have already invested six months of development time and money, and currently still retain their original jobs. Their level of investment differs from the CEO's full-time commitment (six hours per day).
  • Future Funding Dilution:Equity allocation needs to consider the dilution of existing shareholders' equity in subsequent funding rounds. The CEO should ensure that their equity still reflects their contribution after dilution.

Industry References and Negotiation Advice

In early-stage startups, the equity percentage for a non-founder CEO typically ranges from 10% to 20%, depending on the company's valuation, funding stage, and individual qualifications. Since the company has not yet raised funds and the MVP has just been completed, the valuation is low, and the CEO bears higher risk, so a higher percentage, such as 15% to 20%, can be pursued. However, it should be noted that the technical co-founders may expect to retain majority equity to maintain control, so negotiations need to balance the interests of all parties.

It is recommended that the CEO clarify the following points during negotiations:

  1. Quantify the economic sacrifice during the unpaid period and establish an equity vesting mechanism to ensure long-term commitment.
  2. Clarify the scope of responsibilities and milestones, such as adjusting the equity percentage accordingly after completing the first round of funding or achieving specific revenue targets.
  3. Negotiate with the co-founders to ensure that equity allocation remains fair after they transition to full-time commitment, avoiding future conflicts.
"A reasonable equity stake is not a single number, but a dynamic balance based on risk, contribution, and future expectations." — Industry practice note

Ultimately, it is recommended that the CEO engage in open communication with the co-founders, reference similar cases, and consider bringing in legal or startup advisors to assist in formulating the equity agreement. In the early stage with no salary and no funding, equity is the primary incentive, and its reasonableness should reflect the CEO's potential impact on the company's success.