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Indie studio company shares

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I've worked for a new indie studio for about half a year and have been offered company shares to help offset commitments that aren't measurable in my rates (b/c we don't do hourly). This is the company's first game and it's still in pre-production. I also don't have any previously shipped games under my belt (other projects in development though), so I feel like I can't negotiate too hard. Any advice on how to determine if the share is fair? Should I even negotiate at all? Could these shares bite me in the ass if the game flops?

Any and all advice is greatly appreciated! I've only worked strictly contract before, so yeah, this is new to me.

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Generally ownership shares are a small business's most valuable asset.  If the company does well, you'll get a potentially huge value.

 

There's the old story of the painter who did murals for Facebook's first studio and he was offered either cash or shares; he took shares and at the IPO his shares were worth $200M. More typically if the company does well the shares will be worth $50K, $100K, maybe something on that scale, depending on what shares they offer.  It doesn't happen often, but it does happen.

 

But if the game studio does terrible -- and most that are not run as careful businesses will fail -- then they are worth nothing.

 

Most small businesses fail, and in that case the shares won't be worth the paper they're printed on.  

 

With actual shares rather than options to buy shares, there is a slight if the company is not operating in a business-like manner and mixing business funds with corporate funds, if the company takes on debt, even if you did not guarantee the loans there is a slim chance if they declare bankruptcy that someone might go after you instead.  So make sure you never mingle their money.

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I've ... been offered company shares to help offset commitments that aren't measurable in my rates (b/c we don't do hourly).

Perhaps other readers understand perfectly what you mean, but I don't follow. These shares "offset commitments"? Whose commitments? And how are commitments not measurable?
 

Any advice on how to determine if the share is fair?

If the share(s) are in lieu of payment, then IMO it's not a good deal. If they are in addition to payment, then accept them.
 

Should I even negotiate at all?

You can always negotiate.
 

Could these shares bite me in the ass if the game flops?

A game isn't a business. You've been offered shares in a business, not a game. A game can flop yet lead a business to eventual success. A game can be a success yet not help the business succeed. The shares could "bite you" only if you're taking them in lieu of payment.
 

I've only worked strictly contract before, so yeah, this is new to me.

This would still be contractual, I assume.
 

There's the old story of the painter who did murals for Facebook's first studio and he was offered either cash or shares; he took shares and at the IPO his shares were worth $200M.

I had lunch yesterday with an old friend. He had gotten 100 shares of Activision when the company went public. He never sold them, and today his 100 shares are only 4 shares, because of what happened to Activision in 1991 when the company went through a bankruptcy. Edited by Tom Sloper

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Thanks for the responses, both of you. The examples are great as well.
 

Perhaps other readers understand perfectly what you mean, but I don't follow. These shares "offset commitments"? Whose commitments? And how are commitments not measurable?

 

What I meant by this is that I typically produce a work and get paid according to my rate (ex. number of words). However, long meetings about these works ensure, which aren't measured in, for example, word count. Because the company has very little money to pay everyone on our team an hourly rate for meetings, we elevated my base rate to help offset some of this time. It's far from perfect, but as a part-time endeavor and one of my first projects, I'm not opposed to making some sacrifices. That said, a small percentage of company shares were offered to me to a.) help offset this further, and b.) show appreciation for the other work I've done for our current game (like getting us into cons). 

So, it is partially in lieu of payment, but I'm not going to starve death waiting to see my shares worth something.

Is there any general rule of thumb for determining what would be a fair share? For example, if they offer 3%, but because I feel I do a good chunk of work outside of my basic rate work and we *are* pre-production and have no sales to back an evaluation of the company's worth, would asking for 10% seem outrageous? Or 5%?

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Do you even have the option to take "overtime" payment instead of shares? Or is it just shares or nothing?

 

Shares generally are a bad option. Unless you believe the company will lift off at some point, and can keep the "cash" they pay you out in shares locked until that happens. Also be aware of the rules coming with the shares... where I work, shares you get as a bonus often are "time locked", thus you need to wait 5 years before you sell them. There are also some that get only options instead of shares, clawback shemas and whatnot. Be sure to ask about ALL the rules involved to getting, keeping, and finally trading with these shares.

 

3% of what? The companys total worth? Your monthly salary? If its the companys total worth, then a) how do you know what the company is worth in the first place, b) how many people work at the company, and what is your rank and commitment there (if you are a small time artist in a company of 100 all expecting to get some shares to pay for their overtime, 3% certainly will be too much)?

Last thing, the owners/founders of the company usually do not want to hand out more than 49% of their companys ownership to other people, just to make sure they cannot be thrown out of their own company. Certainly there is not the total worth of the company (if there is a way even to measure that) up for grabs, unless you are the owner / one of the founders yourself.

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Without knowing anything about your specific role in the team, compared to the size of the team, and their own commitment, any percentage you state will be meaningless to us.

 

We have a salary security through our unions in Denmark, meaning that if I get laid off I still have half a year to find a new job, before losing my salary. This system however requires me to shut down/leave any business I might be part of, regardless of the worth of that business. I don't know if this applies to other parts of the world, but just check up on your rights, because they might not apply if you own shares in a company. This is of course only relevant if there is a chance of you losing your income.

 

Personally I would steer clear of shares, unless I trust the company owners or consider myself as part of the team. At least in regards to companies with ~zero funds or no prior experiences.

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I've worked for a new indie studio for about half a year and have been offered company shares to help offset commitments that aren't measurable in my rates (b/c we don't do hourly). This is the company's first game and it's still in pre-production. I also don't have any previously shipped games under my belt (other projects in development though), so I feel like I can't negotiate too hard. Any advice on how to determine if the share is fair? Should I even negotiate at all? Could these shares bite me in the ass if the game flops?

Any and all advice is greatly appreciated! I've only worked strictly contract before, so yeah, this is new to me.

 

A lot of indie startups don't have cashflow for salaries, etc.

If you came in accepting this reality, and hoping to turn the business into a success, understanding the risks, then shares are an acceptable reward on top. I would not imagine you'd get more than 10% equity, even assuming it's a small organization though, as you most likely were not present when the business started, and didn't fund it yourself, go through registration, etc. IMHO, I don't think I'd ever willingly give more than 5% equity to anyone on the team. Most likely, I'd give them the option to buy them at a preferential rate, but no more than that. 

 

On the other hand, if you look at the job as 'just a job', then chances are working for a startup isn't for you. Startups aren't your typical 8-5 jobs, they take more than this, and generally speaking, I've seen two groups of people work well with that mindset: driven juniors straight out of school who are much more focused on the end-result than the paycheck (some of which I've seen working without salary for 6 months straights more often than would be sane to admit), and industry veterans that don't particularly mesh well with industry standards and complex bureaucracy (they crave the 'freedom' of the startup, and larger autonomy).

 

Your line of questioning may be a symptom that you don't belong in either of these groups. In this case, the answer would rather be: look for a job and quit.

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