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Ask HN: Fair to reward founders with equity on performance than equal split?
Forming a company with larger than usual founder base. When originally formed, we agreed with a near equal split with clift and vesting. Now it is being proposed to instead switch to a "reward" system, wherby founders are given more shares based on their value and contribution (which is highly subjective). Proposed that in each year and investment round, overall shares are diluted and more is given to those have placed in more effort, subsequntly reducing the stake of others. This is to be assed via some metrics through milestones or a KPI.
This scheme is the first I have heard of it and I cannot find examples where it has been practiced (being successful or not).
Has anyone done anything similar? Or perhaps advises for/against?
Thanks
- kulikalov 6y agoDo you have a PMF? Revenue? Active users?
- complete_novice 6y agoA few active users but these are largely unpaid, no revenue as of yet. Very early stage.
- kulikalov 6y agoThen you are dividing nothingness
- complete_novice 6y agoso how do you propose to divide a company pre-investment?
- kulikalov 6y agoYou have no company yet. Find pmf first. It may be drastically different from your original idea, and therefore it may require different set of skills and different type of commitments from you and your friend.
- brudgers 6y agoIf some founders are not adding sufficient value, the fair solution is buying them out at a fairly negotiated price. The proposed scheme encourages little assholes to become bigger assholes and the slightly alienated to become totally alienated. The biggest problem with the scheme is that it emphasizes "effort theater" over results. In a healthy business relationship everyone's goal is to make everyone rich while becoming rich one's self. An unhealthy business relationship is one in which people try to make themselves rich at the expense of the others. Good luck.
- giantg2 6y agoI agree with this advice. I feel like the new split strategy would be toxic.
- complete_novice 6y agoThis is what I fear, some believe it will encourage healthy competition, but in fact it will encourage toxicity and games for others to roll over their peers in an attempt to game the heirachy
- brudgers 6y agoThe first people to go need to be the people who think it’s a good idea. Or you.
- partisan 6y agoI would start by kicking out the person who suggested this terrible idea. They are either naive or cunning. Either of those are dangerous for a new company. Beyond promoting a toxic culture, this will also result in people teaming up to push performance incentives their way. Like any other system, it can and will be gamed.