Equity distribution · Partnership agreements

Early stage equity - % agreement ?

Geminus Ngo Fat Chief at Vision Venture

July 26th, 2015

I'm working on an app right now and here is my role:

- Investor of 50%-80% funding
- Biz developer
- Product designer/manager
- Tester
- And everything else

I know for the long run I will need to scale down and find people to take over other tasks, but right now I'm not sure how to offer equity appropriately to my collaborators and "partners in crime", these people include:

2 CTO like persons with their own team of 4-5 people each team.
1 investor and probably will involve in our biz development, fund raising, or customer growth.
1 startup partner with an API/integration that we will collaborate with, to enhance our own.

After our first year I may want to enroll in an incubator and raise the first round of seed-funding, how should I recalculate or dilute the % of all my partners above?  

Orion Parrott Founder and CEO, Lendsnap YC S16. We're hiring!

July 26th, 2015

As for dilution, why not let everyone dilute equally? I think that's the way to go for that part. As far as percentages, you really have to see what you can bargain for and what everyone feels good about.  I can recommend: SOONER rather than later. People often have very different ideas about what their share should be.

The investor should be easy: just put him on a convertible note or SAFE for the amount of money he(she) puts in.

Why would the startup partner get any equity? Are you not paying them? Can you just revenue share to them if they already built it? or define yourself as a reseller of their services? 

Umair Chaudhry Controller at Morgan Stanley

July 27th, 2015

@andrew. Agreed the 33% guy might feel bad after 2 years. But look at it this way, if the founder hadn't shared the 33 percent. Then after two years, you would not have had the chance tiger 33% for the price you paid. Original founder gets the 66% is fair


July 27th, 2015

I looked at Slicing Pie for a project - wasn't right for me, but you might find it useful to check out. Equity awarded based on sweat and investments.

Andrew Holmes Data scientist, coder, investor

July 27th, 2015

Every case will be different but there's a potential problem with deals that sound fair initially then seem unfair after a period of time.

For example, one founder works for three months then a cofounder comes onboard. Initially a 67% to 33% split might sound fair, but after two years the guy on 33% is likely to feel he got a bad deal.