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Pretty good explanation. A couple of tweaks: 50/50 is a bad split, because it will lead to paralysis, argument, flying chairs, and eventually bankruptcy. Secon
by alain94040 16y ago
Pretty good explanation. A couple of tweaks: 50/50 is a bad split, because it will lead to paralysis, argument, flying chairs, and eventually bankruptcy.
Second, the advice here is to not pitch the idea when you first meet potential technical co-founders. I disagree: I think sharing the same passion is key, so you definitely should tell me that you plan to revolutionize the music industry (a bad example, I know...). Small talk won't get me, the developer, interested.
- Mistone 16y agowhats your suggested equity split?
- jasonshen 16y agoI think it really depends on how far along the idea/business guy has taken the project. If he has talked to tons of angels/VC's, or lots of potential customers, especially if those customers have indicated or even signed things saying they are ready to pay money to use the product, the split might favor the idea/business guy more than if he has just been "noodling" over something and has some "sketches" of what it might be.
- haploid 16y agoThis. The later you come into a given project, the less equity you would be justifiably entitled to. As to the original question, if you are starting from zero and you want a means of avoiding critical shareholder deadlocks, you can split 45/45/10 with the smaller portion going to a party both founders agree will be impartial. This person can be the initial angel, or perhaps a minor founder who accepts a smaller chunk in order to maintain his dayjob. You can also maintain 50/50 splits of ownership but still break executive deadlocks via a third vote by mandating a third seat on the board. This won't help fundamental shareholder deadlocking, but disagreements rarely go to the shareholder vote level.
- rguzman 16y agoI like this: http://sethgodin.typepad.com/seths_blog/2009/03/advice-on-equity.html http://sethgodin.typepad.com/seths_blog/2009/03/advice-on-eq... Though he makes it seem easier than it really is.
- Devilboy 16y agoA 50/50 split can work fine as long as you have a roulette clause. With a roulette clause or similar it's always possible to easily part ways if the 2 parties reach a deadlock that cannot be resolved.
- mdda 16y agoThis is a definition http://www.practicallaw.com/8-203-6625 http://www.practicallaw.com/8-203-6625 - you'll have to play out a few scenarios to see the terrifyingly stark implications...