In addition to the considerations others have mentioned, I would say from a strictly expected monetary value, a successful consultant will make more money than the first technical employee at a seed stage company. So, if you go that route, you should have other motivations than maximizing your expected return.
As a rule, I don't even think it matters what the valuation was because generally the seed stage companies that should rationally expect to make money would have started with a proven team with prior successful exits.
I'm definitely not advising you away from the offer. I've been a consultant, worked at both successful and failed startups, and preferred both types of startups to consulting. But I still think the expected return is higher in consulting or being a top performer at a large (tech) leader. Good luck whatever you decide.
Exactly - a friend of mine had that at Chevron. In addition to the obvious benefits, she also felt more productive the Fridays she was there since the other half of the office was out.
Ugh, you need a new product team if doing that is the norm. It's gonna happen sometimes, but shouldn't all the time. Maybe you can push back on them before getting too far into the builds, force them to think through things a little deeper?
Some things here (meetings, bad managers, etc.) are all too true, but not unique to software development/developers!
The most frustrating is when I am completely convinced a change I make is going to resolve some failed tests, and then I run the tests, and something still doesn't work. Or I fix something and cause another problem. I enjoy the challenge of getting everything right, but just feel betrayed when I'm convinced I do it right and I'm wrong.
Can't outsource that, though. What I would love to outsource is the actual writing of the testware. I like thinking up all the test scenarios, but wish I could do a brain dump and have someone else write the testware.
The other thing I wish I could outsource is any documentation creation or review. Probably because I can think a lot faster than I can write, and then also feel like I have to take extra time to document things precisely because I might not be able to have a dialog with whoever is reading the docs.
It's hard to say if it's a good offer without knowing how well you're currently being paid compared to market for the salary, and what you would bring to the company. That said, 5% for a senior executive is pretty typical, I think. And I would expect a seed stage company to pay less in salary for a CTO/VPE than a more established company would for the same sort of role (regardless of titles).
You already got some good advice about how to consider equity as part of your total compensation, but that's not what you asked. Hopefully, you've already done some thinking about how much (or little) to value equity yourself. In a vacuum, 5% seems OK for a CTO. If the technology is a critical piece to their business and you have unique expertise in it, you should probably expect more.
Yours is the only response that has attempted to answer the question which was asked. As you say, the others have focused on how to value the offer, i.e. to compare the salary+equity with an equivalent salary-only offer.
For the OP, Angel List may be a good source of comparative data. It has job postings with salary and equity ranges for similar positions.
Those companies decided to build their own solutions rather than use others not due to distrust, but because they saw a business opportunity. They all use 3rd party products somewhere in the organization, but if they make their own product, would you really expect them to use a competing offering?
I agree with the thoughts others have written about fear of losing the best employees. In addition, I think a lot of managers keep things secret because they hope to avoid difficult conversations. Also, if there is one person who you really don't want to share something with for whatever reason, it's tough to let everyone else in. Those things don't excuse a lack of transparency, but I think they contribute.
Regardless, absent of some extenuating factor related to performance, no way should you have been given no notice and no severance. I'm sure they would have taken it poorly had you (when things were going well) have given them no notice.
Assuming you can convince him to join at whatever stock distribution is acceptable to him, you, and your other founder, you might not need to worry about what's left for future investors. That will be a separate negotiation, and everyone will likely get diluted then, whether they own 5% or 50%.
3 founders can work fine. Many would consider it better than 2, all else being equal, since with 3 you can break some decision logjams. But that assumes all 3 are good, and that you have developed a strong working relationship. Reading your post, where you are technical, you are bringing someone on to help, and eventually he may be promoted to CTO, makes me wonder if you view him as more junior, currently. And whether he views himself more junior. That might drive both the equity split, and whether he participates as an equal in routine operational (or even technical) decisions.
Thanks. Yes, those are very good points for me to take into consideration. Given this early stage, I was hoping to get something going faster without having to worry too much about future dilution, etc. but I do worry about his participation and perception of equality from his end of things.
That being said, I had a quick chat with him and apparently, he's doing another startup so looks like the decision has already been made for me for the time being.
From a preference standpoint, I had assumed that founders were in the same boat as employees most of the time (especially first-time founders), just that they have a lot more stock.
If investors put in $10M and the company sells for $9M, doesn't it all go to the investors?
If founders get the same preference as investors, it wouldn't be true. I just didn't think they normally did.
Your understanding is correct, founder shares are typically just common, the same as employees get, whereas a lot of early-stage capital partners (investors) get a different class of stock with a preference attached.
OTOH founders typically have much larger interests in the companies they own, leading to much higher control, which is for all intents and purposes a different class of stock, even though the rights of say, an employee, are nominally the same. Control is everything.
Also, P.S. most employees get options, not shares, which can be exercised into common shares, but are a little different with regard to tax and the fact that they must be "purchased" or exercised.
Edit: they just updated their status page for this.