I'm developing the product and i have a key technical guy working with me. I've 100% ownership and he's asking me 25% of the company or 7.5% non-dillution stock and 7.5% common stock. What's the best deal for me? And what kind of issues i can have dealing with VCs having the 7.5% "golden share"?
In the early stages, usually the founders have a split in equity stake in the company depending on the arrangement and agreement between the founding members. What you can do to make things attractive is make him a CO-Founder and CTO, with say 20% equity, dilution in the normal ratio tween you and him (ie Ration 1:5). I don't like bringing on investors or shareholders with no dilution as it may hurt your chance of bringing on new investors. Even worse by the time you reach Round B, your own equity shares will be diluted several times and you may find yourself no longer the majority shareholder. Find other ways to make the deal attractive to the CTO. Make him feel he is a part of the founding team.