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What they should do is work an equal split. Five parties? 20% each. If the "leader" wants to run with the project and pursue it in a more serious capacity they

What they should do is work an equal split. Five parties? 20% each. If the "leader" wants to run with the project and pursue it in a more serious capacity they can make an offer to the team that will result in dilution. I'd argue that they'd need to make a case, and the additional share would be conditional. Like "If you can close $100K in financing then you will get another 40% stake." Likewise if team members really do want to quit their jobs and chase after this, they'd be accommodated in a similar capacity. Adjust the share balance when events happen, not by padding it heavily up front with the expectation that they will happen. Otherwise you're valuing your contribution vs. some future unknown, yet saying with certainty your contributions are worth 0.4% of that. The chance of that being fair is basically zero.

IkmoIkmo 11y ago
> What they should do is work an equal split. Five parties? 20% each. If the "leader" wants to run with the project and pursue it in a more serious capacity they can make an offer to the team that will result in dilution. Exactly, that makes total sense. Why then did one of the developers, OP's friend, another developer that agreed, propose 0.4%? This is where I get the feeling OP isn't telling the whole story. Knowing nothing else and asked to speculate, I'd say that they proposed 0.4% knowing that Billy wanted to work on his own idea and wanted to turn this into a company, while they just wanted to have a fun startup weekend working on someone else's idea and then go home and go back to their normal lives. As a reward, they propose 0.4% of whatever company arises out of the startup weekend, without wanting to be part of anything else later. Billy said he's happy with that arrangement and they go forth. Why 0.4% and not 100% / n team members? Because it makes no sense for the team of 9 people ultimately for each to have 11% equity in a company that perhaps only Billy will be running. That would mean if a company is formed and everyone gets an 11% share, but nobody actually works there except Billy who works 80 hours a week the next 10 years and turns it into a success, he has the same 11% share as any of the other guys who merely spent 20 hours over a weekend on this. That's why, if you're not interested in running this company beyond StartupWeekend, you'd propose 0.4%, a small percentage for a weekend contribution that is still significant if the company ends up worth a lot (e.g. $10m, means $40k for a weekend of work). A more granular valuation of the work is to simply value it as a fixed amount of money, say $1k per dev, but then you're getting in the realm of 2-day work-for-hire which doesn't make much sense in the context of StartupWeekend, it requires money transfers, investments and risks, and it just doesn't make much sense in a 2 day context to hire random stranger devs. Saying let's see what is possible, if it has any value well let's each have 0.4% even if we don't continue past this weekend, is more practical. This is why I suspect that the article is only part of the story and that perhaps everyone was aware that Billy wanted to turn this into his own company and that the rest just wanted to work at it over the weekend for fun and get 0.4% in case their weekend work turned into a valuable enterprise. Why else would you agree to 0.4% and not just say 'let's see what we can come up with this weekend, and after incorporate it on an equal basis if we want to, or buy out the work by those who aren't interested in pursuing it further'?

IkmoIkmo 11y ago

> What they should do is work an equal split. Five parties? 20% each. If the "leader" wants to run with the project and pursue it in a more serious capacity they can make an offer to the team that will result in dilution. Exactly, that makes total sense. Why then did one of the developers, OP's friend, another developer that agreed, propose 0.4%? This is where I get the feeling OP isn't telling the whole story. Knowing nothing else and asked to speculate, I'd say that they proposed 0.4% knowing that Billy wanted to work on his own idea and wanted to turn this into a company, while they just wanted to have a fun startup weekend working on someone else's idea and then go home and go back to their normal lives. As a reward, they propose 0.4% of whatever company arises out of the startup weekend, without wanting to be part of anything else later. Billy said he's happy with that arrangement and they go forth. Why 0.4% and not 100% / n team members? Because it makes no sense for the team of 9 people ultimately for each to have 11% equity in a company that perhaps only Billy will be running. That would mean if a company is formed and everyone gets an 11% share, but nobody actually works there except Billy who works 80 hours a week the next 10 years and turns it into a success, he has the same 11% share as any of the other guys who merely spent 20 hours over a weekend on this. That's why, if you're not interested in running this company beyond StartupWeekend, you'd propose 0.4%, a small percentage for a weekend contribution that is still significant if the company ends up worth a lot (e.g. $10m, means $40k for a weekend of work). A more granular valuation of the work is to simply value it as a fixed amount of money, say $1k per dev, but then you're getting in the realm of 2-day work-for-hire which doesn't make much sense in the context of StartupWeekend, it requires money transfers, investments and risks, and it just doesn't make much sense in a 2 day context to hire random stranger devs. Saying let's see what is possible, if it has any value well let's each have 0.4% even if we don't continue past this weekend, is more practical. This is why I suspect that the article is only part of the story and that perhaps everyone was aware that Billy wanted to turn this into his own company and that the rest just wanted to work at it over the weekend for fun and get 0.4% in case their weekend work turned into a valuable enterprise. Why else would you agree to 0.4% and not just say 'let's see what we can come up with this weekend, and after incorporate it on an equal basis if we want to, or buy out the work by those who aren't interested in pursuing it further'?