So you have a great idea! And you are so sure of the need for your solution, that you breathe in deeply and decide to go ahead with it. You start working on your startup! If you are lucky, you are not doing it alone. (Unless you are a superhuman, who has a supernatural 48 hours in a day and has all the skills in the world. Then you might manage to build and grow a startup on your own.)
Sooner or later you have to have the uncomfortable talk with your co-founders – how do we divide the shares of the company? How much of it belongs to me, how much of it to you? What is fair? Now – this talk doesn’t actually have to be uncomfortable!
We use something called the “Dynamic Equity Split”. We believe that this truly is the fairest way to divide the pie! Dynamic Equity means, that you don’t have to start with a fixed percentage. Your equity comes from the actual work and money you put into the startup! Your shares change over time accordingly and the more you work (in relation to other founders) the bigger your piece. The system is really simple. You just have to track the time and the money you spent and put it into an excel sheet. Calculations are done and “tadaa” , you instantly have an overview how much of the company belongs to you. Simple as that.
The model was developed by a guy called Michael Moyer. He is a founder in many companies and has been in the “startup world” for a long time. Seeing so many founders burnt with unfair shares, seeing them disappointed and frustrated, he decided to figure out a way to make the process of slicing the pie fair! We tried it out – and we can confirm it. It is fair and really simple to use. Michael wrote a book about it – “Slicing Pie“. He describes the process in great detail and brings out any possible situation, that would influence the shares. It is an easy read and you can even order a free copy here: http://slicingpie.com/
We have been using the dynamic equity split from the beginning. In our case, the circle of the founders has changed a little since we started. Some have left and some joined. I can not imagine an alternative for keeping track of our shares. If we had divided the shares in the beginning among the initial team, it would have been quite a mess. Specially, since not everyone was sure how much time and effort they can put into developing the idea. And when a founder leaves, what then? Luckily, we don’t have to deal with such complex problems and we can focus on what is really important – to solve the actual need and to implement the solution, as best we can!
The author, Annabel, is a co-founder at SnippetGuide. Together, with the technical founders Roberts and Arvi, they do their best to be part of the startup success stories.
The aim of this blog is to record our journey in the Startup scene. We will be sharing our thoughts on the ups and downs in our startup, on big startup subjects like venture capital and angel investors and on anything profound that shapes our journey. Transparent and sincere!