Should I give equity to a technical leader or partner?

Answered by Engineer Saeed Baatiah — computer engineer and web and mobile developer in Riyadh, serving clients inside Saudi Arabia.

Hiring Technical Leadership

Should I give equity to a technical leader or partner? — answered by Engineer Saeed Baatiah

Before equity, separate two cases: a co-founder building with you from zero and carrying the risk, and an employee or advisor performing work for a fee. The first may justify equity; the second usually does not. And if you do grant equity, make it vest over time rather than immediate, with a clawback if they leave early — immediate equity to someone who leaves after six months is a problem that stays with you for years.

One question settles it: are they carrying the risk with you, or being paid? Someone working with no fee or a heavily reduced one in exchange for equity is carrying real risk, and that justifies equity. Someone taking a full fee and asking for equity on top is asking for a bonus rather than sharing risk — which may sometimes be deserved, but on entirely different terms.

And if you decide to grant it, three terms are non-negotiable: vesting over time (they own nothing in month one and earn gradually over years), an initial cliff before which they earn nothing at all (usually a year), and a clawback if they leave or do not deliver. Their absence produces the worst case: a partner holding a permanent share of your company who left after a few months.

And the alternative usually overlooked: a bonus tied to a specific outcome instead of equity. If the goal is to motivate them toward one particular success, a bonus on achieving it is simpler, clearer, and does not introduce a permanent partner into your company’s decisions. Equity is a decision that lasts years; a bonus ends when it is paid.

  • The test: are they carrying risk, or being paid?
  • Vesting over time, an initial cliff, and a clawback right
  • Consider an outcome-linked bonus instead of permanent equity

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