Equity is the currency of startups. Founders use it to attract not only investors but also software talent. How to recruit developers for equity, you ask? This article will answer that. Let’s get started.
Without much capital, tech startups are in a disadvantageous position when it comes to recruiting talented developers. So, how does a newly founded business compete with more established ones when hiring the top software developers? Having an excellent tech business idea will help, of course. However, it would not be enough.
One way to convince the top developers to become your partner is to offer them a share of your company. How do you do this? Let’s discuss how to recruit developers for equity and how much you should offer.
Related Video: Slicing Up the Equity Pie
Paying with Equity
So, you have the next great tech business idea. But you don’t have the technical skills in programming. Therefore, you have to hire a software development team to design, write, and test the code to develop your product.
However, hiring the best developers is not always easy. Since the top programmers are in demand, your startup may not be able to carry the costs of hiring a whole team.
Some founders may choose to save money by outsourcing the development process. Yet, there are many things to consider when selecting the best offshoring company that will help you turn your vision into reality. Hence, startups opt to recruit programmers using their equity.
But, what does hiring for equity mean?
It is a business growth model where a company pays its hires with shares instead of regular compensation. It helps the company develop its minimum viable product (MVP) and grow without the financial backing to pay higher salaries. The business model also provides employees an investment in a company that can become successful.
How to recruit developers for equity? Founders will offer a share of the startup to top developers to be co-founders or partners. Having an equity stake and the chance to help shape the startup is a big incentive that can attract great programmers.
How Much Equity is Enough?
So, how much should the founders grant to the developers? Properly distributing the company’s equity is never simple. Yet, there are several guidelines on how much equity should an employee get, such as:
- Timing of Hiring
As an analysis of over a thousand startups showed, 97% of technical hires for startups in seeding stages received equity as compensation. It is prudent to study how much of your startup’s equity is available as options for technical hiring.
Related Video: Equity in Leadership
Recruiting Developers for Equity
As a tech startup founder, hiring the right software development team is one of your top priorities. However, startups in the seeding stages are on a limited budget. And, the cost of hiring a development team often runs above the operating expenses.
Consequently, many founders are offering stock options to attract top developers. This may be a complex and challenging task. But, here are some tips on how to recruit developers for equity. This may be a complex and challenging task. But, here are some tips on how to recruit developers for equity.
1. Personal Connections
The first and obvious way to recruit developers for equity is to approach who you know personally and professionally. Because you know how capable they are, you should trust them to turn your vision into reality.
Additionally, you have already built professional and personal relationships with them. It would be easier for you to share your business ideas and goals.
2. Join Startup Events
These events will help you network with other startups. Plus, you can learn who they work with and how they use their equity to recruit technical talent.
Additionally, these events also attract developers who are looking to work with startups. These developers are looking for the right opportunity to connect with startups where they can work for equity.
If there are no startup events in your area, you can organize with other startups to start one. It will help boost the technological sector of your location, which will attract more developers.
3. Attend Developers’ Events
Just like how developers will attend startup events, founders should also participate in developers’ events. You can meet all types of developers at these events who specialize in different technologies.
When attending these events, you should be ready to approach developers. That’s why you have to prepare your business pitch and always be prepared to present your idea to developers. Make it convincing and worthwhile to have them interested in working and having a stake in your company.
4. Browse Online Communities
Now, if you can’t find any startup or developers’ events, you should start browsing online communities. There are online communities for startups where you can build your network and direct contact with developers.
In these online communities, you can learn more about how to recruit developers for equity from founders like you. Aside from developers and technical hires, you may also find people who can fill your organization’s vacant positions.
5. Tie-Up with Equity-Based Development Firms
How about making a development company as a partner? Some organizations are willing to help you build your MVP for a minimal fee and a stake in your startup.
Taking sweat equity to help build your product is both a win-win situation for you and the equity-based development firm. For example, the firm will convert 50% of its development fee to sweat equity. As a result, you can use what you saved towards marketing and business development. And at the same time, the firm gets a sizable share of your company.
Now, you know how to recruit developers for equity. Therefore, you need to expand your network aggressively. Learn from other startups and make sure to have your business pitch always on ready.
Finding Great Partners
Equity is such a powerful tool that startups have. They can use it to recruit top talent and as leverage for funding their growth. Nonetheless, you must never forget that just like cash, equity is limited.
It may be a sure way to staff your organization with the best hires to increase your chances of success. Still, you cannot just give away your startup’s shares recklessly. That’s why you must be disciplined and understand the value of the shares you are willing to use.
Are you ready to turn your business idea into reality? Full Scale will help you. We will be your partner in building the best development team for your product. Our top-notch developers, programmers, QA testers, and project managers are here to help you develop your MVP.
Let us get started! Contact us, and let’s talk business.