Giving early employees equity in self funded startup

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Giving early employees equity in self funded startup

I co-founded a company with one other co-founder around one and a half years ago. We don't have any investors and both own 50% of the company.

It started more as a hobby project next to university, but has quickly turned into our full time occupation and has been growing rapidly to the point where we have decent profits, enough to comfortably pay salaries for any employee needs we have at the moment.

We're now in the process of recruiting the first developers (outside of us founders), and so far we haven't really considered including equity as part of the compensation, mainly because we don't have any legal setup for that (as I said, we simply are 50/50 owners in a very traditional legal setup, nothing startup specific).
Other arguments against it are that on the one hand we don't have any previous investment round as a reference for the company's value, so it would be hard to know (for us, but even more so for the candidate) how much their equity would even be worth, and on the other hand we believe we have a good case for the company being worth $20+ million, which probably is a high valuation for a startup hiring their first employees, so the equity percentage we would offer would likely be a lot lower than that of other first hire positions.

Especially after reading some of the posts and comments on this subreddit, I'm questioning whether this might be the wrong approach. We are planning to pay them a salary that is at or even slightly above their “market value”, so it's not like we have to give out equity to make up for an otherwise poor salary. But do early early employees expect some form of equity as part of their compensation? We want people that are motivated and willing to work in an startup environment, and I'm not sure if they might rule out startups that don't give them equity.

I would love to get your opinions on this, both from the perspective of a founder and from the perspective as a candidate thinking of joining a startup.
If you do think that equity should be included as part of the compensation, I would also be really interested in hearing your thoughts on what percentage you think is a good amount.

submitted by /u/jacob_throw
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