You need to have a 50-50 equity stake with the person you bring on. The product you build, if they think it is saleable, should be part of a payback setup or equity share, or should be licensed to a new entity you create.
My suggestion would be a 1/3rd 2/3rd rev split until you make 1.5mm lifetime rev, and then after that 50/50. You will be paid back for the time you have put in, and you will have a partner who is on equal footing to you. If you need to be 51/49, so be it. If you need to maintain the license to the code, figure that piece out, but you will be best served with a 50/50 split in the long run.
As far as the amount, make sure the other person thinks it's fair. If they don't find the split fair, then it'll just create issues later. Better to give away 49% of your company and have it succeed than to continue to own 90% and have it fail.
You are also not flush with capital from a VC or angel investor, so you can't just hire what you are missing. All you can really offer is an equity stake in a 'potentially valuable' business.
It is very challenging to decide just how much equity you must part with in order to attract the talent you need. Everyone can throw in their two cents without knowing much of the specifics for your particular case. Take any such advice with a grain of salt. The 'right' amount could be anywhere from 10% to half of the company. There are no magic formulas to determine what is best.
Simply look for a separate, independent business partner with marketing and support skills.
Their equity becomes the customer base that they will grow and develop in the same way you developed your equity in the software.
You simply provide service to this marketing partner at some agreed upon fixed rate. They will be responsible for finding and handling their customers.
A very simple business arrangement/relationship and clear division of labor. I'd recommend avoiding making this any sort of *exclusive* arrangement in case the partner does not perform.
I calculate how long I have been working on the product and at what speed. Suppose a year at half time (4 hs a day), then if I make a deal to work 4 hs a day for another year and a partner does the same, I would get 2/3 and they 1/3. Reevaluating at the end of the period.
1) find a fractional sales/marketing firm. They may need a retainer and monthly fees but you can also negotiate outcome based commission and early termination in case they don’t deliver
2) if you have to give equity, I’ll say 15-20% is good, with 1 year Cliff and 4 year vesting .
On the other hand you have no idea how to or skills to make money from it. So the person who does is bringing an awful lot as well.
Or do you need 2 or 3 sales people?
I would offer commission on each sale and a vesting program to sales staff where they get 5% if they hit certain targets, 10% if they hit others..
Technical Foundation and Completed Product: You have invested a significant amount of time and effort in developing the application, which has already passed the MVP stage and is ready for use. This substantial contribution provides the groundwork for further development and marketing efforts.
Maintaining Control: Holding 51% equity allows you to retain control over strategic decisions within the company. This is crucial to ensure that your vision and goals continue to drive the direction of the business.
Division of Responsibilities: Considering that your potential co-founders will primarily focus on marketing and business development, their contributions will be highly valuable. However, this does not diminish the importance of your technical input and development expertise.
Management Flexibility: Retaining a controlling interest (51%) also gives you the final say in case of disagreements. This is important for effective management and conflict resolution.
Motivation and Balance: Co-founders should be adequately motivated to work on the project, so they should receive a significant equity share. This can be around 20-25% each, which collectively totals 49%, leaving you with 51%.
An example of equity distribution could be:
You (Founder and Developer) - 51% Co-founder 1 (Marketing and Business Development) - 24.5% Co-founder 2 (Marketing and Business Development) - 24.5% This distribution ensures that you retain control over the company while providing significant motivation and involvement for your co-founders. It is also essential to formalize all agreements in a legally binding contract that outlines each participant's contributions and mechanisms for conflict resolution.
Your goal is to have sales, not marketing. Give a cut of ARR. Rate varies depending on how much partnership involvement is expected for the sale.
Do you have users for your app? Who is the target audience and what problem does your tool solve
Whats your current revenue? How fast is it growing? What is your partner’s goal in 1,10 years? What’s his strategy of achieving it? From this it is easy to set up timeframes and equity share steps.
Your product worth nothing until it is a profitable business, it is a liability.
Sorry to disappoint but business side of things worth much more than coding (if it is done well), and the only way to know how well it is done — measure revenue and other business metrics. Not lines of code (the more of them the worse, actually).
Also for the love of God give him a 1 year cliff, 4 year vesting schedule. DO NOT just cut him equity.
Other comments here also properly note, you may not even need a cofounder. Just hire a commission based sales dude. That sounds much better.
It's your product. They're just selling it for you. While this is a valuable service, it's not a co-founder level of service, unless you want them to also handle the other day-to-day-operations of the company, in which case you're their employee and you should be discussing a licensing arrangement for your IP.