Equity distribution in early-stage startups is a slightly odd subject. Obviously at this point the startup is worth nothing – or less-than-nothing, if expenses are being recorded as debts on the future company – and who wants to argue about percentage points of nothing? Sometimes the whole subject is just ignored.
On the other hand, whatever the addressable market size of the idea at hand, the spectre of founders squabbling over enormous wealth is lurking somewhere in the subconscious of everyone involved, so it is equally possible to go the other way, and invoke complex calculation methods of one kind or another, however irrationally over-fussy.
While complex approaches are arguably better than failing to address the issue at all, a simpler method is more typically adopted: if there are two founders at the beginning, they are usually assumed to have 50% each, if three, 33 1/3%, etc – as in this Seedcamp agreement template.
If they add additional co-founders, there is a re-distribution by agreement, such that the original co-founders see their percentage ownership reduced, to ‘make room’ for the new partner. The process is repeated each time a new equity-holder is added (ignoring such things as special share types – usually considered as over-complicated at early stages).
I consider that there are several problems with this:
Continue reading “Startup Equity Distribution – an incremental approach”
(apologies … many and very humble apologies, indeed .. to Jane Austen).
It is a truth universally acknowledged, that a single startup wannabee, in possession of only some grand ideas and a sub-set of the necessary skills, must be in want of a co-founder.
As an aspiring startup founder, possessing only some of the skills needed to make any of my ideas fly, not even sure if one of my own ideas should be the first one I work on (see earlier post), I need to find a co-founder or two – or five.
How do I do this? Well, as far as I can see, I’m already going along the accepted pathway. Attending tech networking events, talking to people, putting myself about, writing to people, trying to be as noticeably helpful and interesting as is consistent with not seeming creepy. And it’s great – I am consistently impressed by how positive my experience at each event is, by how interesting/interested the people and their ideas are (posts passim).
But is it enough?
Continue reading “Project Proposal: Co-Founder Jamming”
This Developers & Entrepreneurs Meetup wasn’t actually my first. Over the last couple of years, I have been to a couple of other similar events. Nevertheless, it’s the first one I’m going to write about here, so I’m grateful it was a good one!
This wasn’t a ‘pitching’ event, but a well managed discussion around a fairly well-defined topic. We heard from two speakers about their own very different experiences in finding their co-founders, and what sort of conversations and agreements they had come up with (Jose Bort of pickevent.com and Kwesi Johnson of Imakethathappen.com – both startups that have launched recently) .
Both were very open, and their stories were interesting, which got things off to a good start, and from then on there was a fairly free flow of contributions from around the room.
Continue reading “Tech Debate: “Equity vs. Salary for co-Founders””