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”
This post from Newspodge brought PitchMark to my attention – a service that attempts to offer confidence to content creators and inventors by acting as a time-stamped repository of record, and backup legal support. The service isn’t free, but although it doesn’t look expensive, in the age of freemium everything it perhaps looks so at first. Close investigation of exactly what it offers will be important – the devil is in the detail with this sort of thing.
This is perhaps something that could be built-in, or partnered with, the Co-Founder Jamming idea.
(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”
As the name suggests, this is not so much a networking event, as an opportunity for startups to get free legal advice. The organisers bring along some working solicitors, and team them up with a number of law students. They sit around a large table, and you put your issue to them, then talk it through.
There were three tables on this occasion, and they saw us one at a time, on a first-come, first-served basis. There wasn’t any noticeable time pressure – you had as long as you wanted to explore your issue.
It’s a great idea –
Continue reading “Start-Ed: Free legal advice meetup Nov 20th 2013”