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I'm really curious what most people do now-a-days. A long time ago I started a company with 3 friends. We were advised to divide the company basically by shares

I'm really curious what most people do now-a-days. A long time ago I started a company with 3 friends. We were advised to divide the company basically by shares/points/option. We each got 1 point for each month we were with the company. So first month each of us has one point. Second month each has 2 points. If someone quits then in 6 month it would have been 6, 6, 6, 2 which means the 4 would own 30%, 30%, 30%, 10%. In a year it would be 12, 12, 12, 2. That's 31.5% each for the 3 remaining partners and the guy who left is now down to 5% At the time that seemed like a great idea. Then I listened to the podcast, Startup and I hear the Alex Bloomberg offer his partner 10%. "Seriously? You haven't actually done anything yet". It seemed to me he should have used the point system. At best he should start with 2 or 3 more points (or heck even more because he's the "talent") but otherwise given there was basically nothing to the company yet it seemed fair. If his partner puts in the time in a few years they'll be nearly equal. They settled on some random numbers but it seemed short sighted. Maybe they'd need another partner. The points system seems to work. New partner starts, you decide on some starting points, possibly zero, just vest your points. If it was 5 people who've been working a year and you come on at the end of year 1 then in 4 more years it will be 60,60,60,60,60,48. That's 17% for the 5 originals and 13% for the new partner The 2nd season had the same issue. Instead of going by time invested in the company they were just picking random numbers. It seems very arbitrary and unfair. Of course maybe the point system is just as unfair to some.

zcdziura 11y ago
I had never thought of dividing company in that way before, but it makes a lot of sense. Thanks for the input!
RedditKon 11y ago
Is there any sort of cliff with the points system? At least with a normal vesting schedule once you hit a 1 year cliff you're granted a certain portion of the equity. It seems like with the point system you run the risk of every founder just being perpetually diluted, which would ultimately un-incentivize employees.
shalmanese 11y ago
What a lot of people fail to understand is that successful startups derisk in exponential steps. It may seem unfair to a lot of people that early employees are paid 2 or 3 orders of magnitude of equity less than founders for doing perhaps even more work. What they fail to understand is that they're not being paid equity for work, they're being paid for risk. Successful startup founders are obsessed with derisking at every step along the way and even when it seems like "they haven't done very much", the stuff they are doing is relentlessly pushing a startup through the various gates in which a certain percentage fail at every gate. So it wouldn't surprise me if a reasonable equity split for Gimlet ended up around the 90/10 range. Considering that Alex managed to raise $1.5M almost entirely based on the back of his reputation, he's really offering ~$700K of equity to his co-founder vesting over 4 years. There's no way his other co-founder could have found an opportunity that big through any other avenue so it would have been smart for him to take the 10%.

zcdziura 11y ago

I had never thought of dividing company in that way before, but it makes a lot of sense. Thanks for the input!

RedditKon 11y ago

Is there any sort of cliff with the points system? At least with a normal vesting schedule once you hit a 1 year cliff you're granted a certain portion of the equity. It seems like with the point system you run the risk of every founder just being perpetually diluted, which would ultimately un-incentivize employees.

shalmanese 11y ago

What a lot of people fail to understand is that successful startups derisk in exponential steps. It may seem unfair to a lot of people that early employees are paid 2 or 3 orders of magnitude of equity less than founders for doing perhaps even more work. What they fail to understand is that they're not being paid equity for work, they're being paid for risk. Successful startup founders are obsessed with derisking at every step along the way and even when it seems like "they haven't done very much", the stuff they are doing is relentlessly pushing a startup through the various gates in which a certain percentage fail at every gate. So it wouldn't surprise me if a reasonable equity split for Gimlet ended up around the 90/10 range. Considering that Alex managed to raise $1.5M almost entirely based on the back of his reputation, he's really offering ~$700K of equity to his co-founder vesting over 4 years. There's no way his other co-founder could have found an opportunity that big through any other avenue so it would have been smart for him to take the 10%.