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Ask HN: How much % for the Idea/Concepts behind a Startup

5 points by dryicerx 18y ago

I have started a start-up in January and since have gathered several co-founders who will be joining full force in the Summer. I want to have a equity sharing vesting-over-time structure finalized and agreed upon. Since money is not involved yet, equity sharing seems to be the only fair option towards everyone. (http://news.ycombinator.com/item?id=580930) I want to make it fair for everyone including my self, and wanted to know what % of the ownership is usually held by the original founder, as the person responsible for the key ideas/concepts and as someone who risked it all and went all in working on it a few months before the rest of the team was formed. In other words: How much is the key ideas/concepts behind a start-up worth? Thanks HN edit: when I mean how much it's worth, I am also meaning idea/concept/research work/proof-of-concept as a whole. I think it was a bit misleading the way I worded it earlier.

cperciva 18y ago
the person responsible for the key ideas/concepts That's worth approximately 0% of the shares. as someone who risked it all That's also worth approximately 0% of the shares. working on it a few months before the rest of the team was formed I'd look at this from a perspective of how many months you'll have spent working on this vs. how many months everybody else will have spent working on this at the point where you could reasonably expect the company to start paying you market rates in cash instead of equity. Based on a complete lack of knowledge of your company, I'd pick a two-year horizon and say that you should get 25% more than new people, in light of your 6 extra months of work. So if this company is you plus 3 other people, I'd split the stock 29.5 / 23.5 / 23.5 / 23.5.
- dryicerx 18y ago
  But without the original idea, the start-up wouldn't come to formation to begin with, right? Also the even split between the co-founders isn't quite possible either (one is working summer only, another is part time over summer).
  - cperciva 18y ago
    But without the original idea, the start-up wouldn't come to formation to begin with, right? Ideas are cheap. It's execution which matters. Also the even split between the co-founders isn't quite possible either (one is working summer only, another is part time over summer). Then estimate how much contribution each "co-founder" is making and allocate stock in proportion to that.
  - tybris 18y ago
    Funny, how people seem to value their ideas.
    - dryicerx 18y ago
      It's not really something I want to spend any time on, but I would much rather do it now than leaving it for later.
- deleted 18y ago
  [deleted]
Travis 18y ago
For my startup, we had 5 people in on it from the beginning. The workload is split evenly, except the President is def. putting more time in than the other guys. We spoke with some funding groups, who said they like to see the President have a greater interest (seems to help by giving someone a bigger vote in the direction). So VCs might like to see an uneven split; we each decided to give the President 1.25% of our overall share. BTW, we're currently a friends/family funded, bootstrapped company that's post-revenue, but not yet ramen profitable.
- dryicerx 18y ago
  A equal workload would have made things a lot easier for us, but some of our co-founders have other obligations so not everyone is working full time on this. I didn't know about the VC's requirements as that, but seems to make sense. Good to know.
numair 18y ago
There aren't any rules about this, and anyone who tells you that there are hasn't been doing this for very long. Unfortunately, however, equity is one of those places where you have to assert yourself and potentially be a temporary asshole to get what you want. You should have asserted yourself and your claim from the beginning (I.e., "this is my company, here's what you could get if you joined"), but it seems you've missed that opportunity. I'm actually surprised you have allowed this to drag on for such a long period of time -- take care of it immediately. The only "rule" is to do whatever you can get away with that leaves you with the greatest share while keeping others happy. Oh and, whoever tells you to ask your INVESTORS how to split it up is truly ... Well ... Nevermind. :)
bravura 18y ago
On Noam Wasserman's blog, http://founderresearch.blogspot.com/ http://founderresearch.blogspot.com/, he finds that the idea guy typically gets about 5-10% for the idea. IIRC. I cannot find the URL right now. You should really negotiate with the rest of the team members based upon a) how replaceable they are and b) how much effort they are putting in. Milestone-based vesting may also be appropriate in certain circumstances.
- bravura 18y ago
  You should also try asking your question on thefund.com. Their forums are more geared towards term sheets and negotiation nitty gritty details.
jgamman 18y ago
one would think (100 - equity needed to incentivise other workers)... sarcasm aside, that's the only thing that counts - you have to make a deal and the only thing you have to buy their time is equity in your idea. 1% of a x-million dollar company or 100% of a not-million dollar company.

5 points by dryicerx 18y ago

cperciva 18y ago

the person responsible for the key ideas/concepts That's worth approximately 0% of the shares. as someone who risked it all That's also worth approximately 0% of the shares. working on it a few months before the rest of the team was formed I'd look at this from a perspective of how many months you'll have spent working on this vs. how many months everybody else will have spent working on this at the point where you could reasonably expect the company to start paying you market rates in cash instead of equity. Based on a complete lack of knowledge of your company, I'd pick a two-year horizon and say that you should get 25% more than new people, in light of your 6 extra months of work. So if this company is you plus 3 other people, I'd split the stock 29.5 / 23.5 / 23.5 / 23.5.

dryicerx 18y ago
But without the original idea, the start-up wouldn't come to formation to begin with, right? Also the even split between the co-founders isn't quite possible either (one is working summer only, another is part time over summer).
- cperciva 18y ago
  But without the original idea, the start-up wouldn't come to formation to begin with, right? Ideas are cheap. It's execution which matters. Also the even split between the co-founders isn't quite possible either (one is working summer only, another is part time over summer). Then estimate how much contribution each "co-founder" is making and allocate stock in proportion to that.
- tybris 18y ago
  Funny, how people seem to value their ideas.
  - dryicerx 18y ago
    It's not really something I want to spend any time on, but I would much rather do it now than leaving it for later.
deleted 18y ago
[deleted]

Travis 18y ago

For my startup, we had 5 people in on it from the beginning. The workload is split evenly, except the President is def. putting more time in than the other guys. We spoke with some funding groups, who said they like to see the President have a greater interest (seems to help by giving someone a bigger vote in the direction). So VCs might like to see an uneven split; we each decided to give the President 1.25% of our overall share. BTW, we're currently a friends/family funded, bootstrapped company that's post-revenue, but not yet ramen profitable.

dryicerx 18y ago
A equal workload would have made things a lot easier for us, but some of our co-founders have other obligations so not everyone is working full time on this. I didn't know about the VC's requirements as that, but seems to make sense. Good to know.

numair 18y ago

There aren't any rules about this, and anyone who tells you that there are hasn't been doing this for very long. Unfortunately, however, equity is one of those places where you have to assert yourself and potentially be a temporary asshole to get what you want. You should have asserted yourself and your claim from the beginning (I.e., "this is my company, here's what you could get if you joined"), but it seems you've missed that opportunity. I'm actually surprised you have allowed this to drag on for such a long period of time -- take care of it immediately. The only "rule" is to do whatever you can get away with that leaves you with the greatest share while keeping others happy. Oh and, whoever tells you to ask your INVESTORS how to split it up is truly ... Well ... Nevermind. :)

bravura 18y ago

On Noam Wasserman's blog, http://founderresearch.blogspot.com/ http://founderresearch.blogspot.com/, he finds that the idea guy typically gets about 5-10% for the idea. IIRC. I cannot find the URL right now. You should really negotiate with the rest of the team members based upon a) how replaceable they are and b) how much effort they are putting in. Milestone-based vesting may also be appropriate in certain circumstances.

bravura 18y ago
You should also try asking your question on thefund.com. Their forums are more geared towards term sheets and negotiation nitty gritty details.

jgamman 18y ago

one would think (100 - equity needed to incentivise other workers)... sarcasm aside, that's the only thing that counts - you have to make a deal and the only thing you have to buy their time is equity in your idea. 1% of a x-million dollar company or 100% of a not-million dollar company.