CTO: Equity agreement vs Employment agreement vs Consulting agreement

jules4415·Jun 23, 2021

Hi I am still early stage and am trying to figure out the best way to bring on a CTO. We both have jobs until we get funding to go full time at the start-up. The start-up does not have enough money to hire employees (I am not an employee and do not receive salary). What is the best way to bring the CTO on-board? I am getting asked about tax ramifications for the options as well as equity. Thanks in advance!

jennzee·Jun 24, 2021

Hi Jules, My co-founder and I are in a very similar bucket. Our experience thus far is that it depends on what your candidate is willing to do. We have spoken to some who want a salaried position (but then arguably you could say they receive less equity), which we could only do post raise. We have also spoken to some more flexible and understanding the needs of a pre-seed start-up >> they have suggested e.g. 6 month contract to cover living expenses and bills with the intention to change to full time employment post raise. It seems like it really depends on what candidates are willing to do. In our job spec, we have stipulated salary: flexible.

jules4415·Jun 24, 2021

Jennzee, Thank you for your comment. It helps to know I am not the only one in this situation!