Questions

The business is basically expanding the "brand" of a celebrity chef. I was a cheerleader for the chef and have been part of various negotiations. He now has a television show overseas that is successful. We are ready to expand the brand to other countries, as well as diversify into product, with the ultimate goal of a restaurant chain. We are looking to formalize our business relationship. The chef has virtually no business background; but he is both product AND spokesperson. We have a handful of functional employees...I will be taking on role of CMO, CGS and CBDO; creating both strategy AND marketing for the brand in addition to creating the relationships needed to succeed.

As you may suspect, there really isn't a hard and fast answer. You can review averages to see that a CEO typically becomes a major shareholder in a startup, but your role and renumeration will be based on the perceived value you bring to the organization. You value someone's contribution through equity when you think that they will be able to add long-term benefits, you would prefer that they don't move company part way through the process, and to keep them from being enticed by a better salary (a reason for equity tied to a vesting arrangement). Another reason is when the company doesn't have salary money available but the potential is very strong. In this situation you should be especially diligent in your analysis because you will realize that even the best laid plans sometimes fall completely short. So to get the best mix, you have to be very real about the company's long-term growth potential, your role in achieving it, and the current liquidity necessary to run the operations. It should also be realized that equity needs to be distributed. You cannot distribute 110% and having your cap table recalculated such that your 5% turns into 1% in order to make room for the newly hired head of technology is rather demotivating for the team. Equity should be used to entice a valuable person to join, stay, and contribute. It should not be used in leu of salary that allows an employee to pay their bills. So, like a lot of questions, the answer is really, it depends. Analyzing the true picture of your long-term potential will allow you to more easily determine the correct mix.


Answered 5 years ago

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