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A 50/50 split can work for the (very) small subset of cases where two people of comparable skill and commitment start building something from scratch (nothin' b

by limist 16y ago

A 50/50 split can work for the (very) small subset of cases where two people of comparable skill and commitment start building something from scratch (nothin' but a half-baked idea) together, with no prior investment/work/IP, no domain expertise, no key contacts, no customer channels, nor any major capital infusions. Oh, and both parties have a clear record of making good decisions together and resolve disputes effectively. But for most other cases in the real world, these two resources offer a more rational and open/honest approach: http://founderresearch.blogspot.com/2006/01/splitting-pie-founding-team-equity.html http://founderresearch.blogspot.com/2006/01/splitting-pie-fo... http://www.andrew.cmu.edu/user/fd0n/35%20Founders%27%20Pie%20Calculator.htm http://www.andrew.cmu.edu/user/fd0n/35%20Founders%27%20Pie%2...

markklarich 16y ago
I particularly like the pie calculation as it addresses more variables more effectively. I would add that the agreement used (probably an LLC or Limited Partnership rather than a corporation) should provide sufficient flexibility that when things change (and they certainly will) the agreement is ready to help adjust the relationships. Thus, I would, among other things, use the pie chart each year to help adjust the relationships to meet changes that have happened over the year. The prime example is the founder who left after six months to do something else. Or the manager who is brought in after the idea is making money, but not much money.
- speleding 16y ago
  The whole point of Joel is that you want to avoid addressing those variables because it leads to arguments. It's impossible to determine almost any variable without being subjective so you open the door to fights. The only non-subjective way is an equal split.
staunch 16y ago
What makes you think that's a small subset? I'd guess most startups are evenly split. I created a poll, so maybe we can get some data: http://news.ycombinator.com/item?id=2445715 http://news.ycombinator.com/item?id=2445715
- stanleydrew 16y ago
  The small subset applies to the set of startups that meet all the conditions noted. The suggestion is that 50/50 isn't a good idea unless your startup meets all the conditions. Most don't. But you might be right that most startups split equity evenly, even if according to the GP they shouldn't.

by limist 16y ago

markklarich 16y ago

I particularly like the pie calculation as it addresses more variables more effectively. I would add that the agreement used (probably an LLC or Limited Partnership rather than a corporation) should provide sufficient flexibility that when things change (and they certainly will) the agreement is ready to help adjust the relationships. Thus, I would, among other things, use the pie chart each year to help adjust the relationships to meet changes that have happened over the year. The prime example is the founder who left after six months to do something else. Or the manager who is brought in after the idea is making money, but not much money.

speleding 16y ago
The whole point of Joel is that you want to avoid addressing those variables because it leads to arguments. It's impossible to determine almost any variable without being subjective so you open the door to fights. The only non-subjective way is an equal split.

staunch 16y ago

What makes you think that's a small subset? I'd guess most startups are evenly split. I created a poll, so maybe we can get some data: http://news.ycombinator.com/item?id=2445715 http://news.ycombinator.com/item?id=2445715

stanleydrew 16y ago
The small subset applies to the set of startups that meet all the conditions noted. The suggestion is that 50/50 isn't a good idea unless your startup meets all the conditions. Most don't. But you might be right that most startups split equity evenly, even if according to the GP they shouldn't.