

Ask HN: Percentage table for startups - husky

I&#x27;m keen to write a formula that clears up confusion about percentages for early-stage startups.<p>I don&#x27;t want to repeat the wheel - does anything like this exist?<p>eg: instead of simply assigning 33% to each founder at the start (when you have no idea or commitment) you have a big pot you can assign percentage from:<p>All these percentages are made up as an example:
Came up with idea: 5%
Worked on initial prototype: 5%
Built the v1 product: 20%
Came on full-time to work on the product: 70% vested over year 1<p>If anyone fails to deliver or drops out then they lose their percentage up to the last stage.<p>For me this would solve a big issue of expectations and fairness.<p>What do you all think?
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tptacek
Joel Spolsky wrote the canonical post on this:

[https://gist.github.com/isaacsanders/1653078](https://gist.github.com/isaacsanders/1653078)

Spoiler: "Coming up with idea", "working on initial prototype" doesn't earn
you any equity. Also: vesting usually runs 4 years. One year is certainly not
long enough.

~~~
my_username_is_
Do you think that 4 years is the right amount of time? Why do you reject one
year as not being enough? Simply because it isn't what is usually done by
other companies, or is there more to it than that?

Also thanks for sharing that link. It's a good read, although I don't entirely
agree with everything in it

~~~
mechanical_fish
It's the "replacement principle". Alice and Bob are co-founders. Bob gets hit
by a bus and goes on disability for _N_ months; he's out of the picture. The
company must now replace Bob. Does it have the resources to do that?

If the bus hits Bob during the first two months, Alice and Bob are probably
the only employees. Risk is still very high. Bob must be replaced with another
co-founder, who will demand the usual amount of co-founder equity: 50%. The
co-founder shouldn't settle for 25% of the company. (For that matter, neither
should Alice.) Bob needs to get nothing. That's why there needs to be a one-
year cliff.

The same logic applies if the bus hits Bob in month 13. If Bob disappears with
50% of the equity, there just won't be enough equity left to exchange for the
employees that haven't been hired yet. You can only give away half the company
so many times. However, by month 13 the company has hopefully learned
something, built something, gotten some traction, so risk is lower. Perhaps a
few more employees have been hired. The company can now afford to give Bob
25%, plus 2% per month.

The vesting timeframe is based on the typical time required for the founders
to distribute their equity among a group of early-stage employees. It makes
intuitive sense: To insure against the loss of any one person, the company
recruits more and more people and shares the risk, and the reward, among them
all. Eventually the company is sufficiently distributed that it can withstand
even the loss of a co-founder.

But it doesn't happen overnight. As Spolsky says, it will take roughly a year
to hire every round of employees. Hiring is hard, growing a functional
organization is hard, and these things can only happen on human timescales:
Months and years, not hours and days.

After the first four years, Bob's share will have been diluted by grants to
investors and early-stage employees, and the company will have a track record
and a trajectory, which mitigates risk. At that point, future success won't
depend on keeping Bob from packing up his full share and moving to Costa Rica.

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taprun
I think that such a thing would be very difficult to apply to all startups.
When assigning percentages, it should be based upon value provided by each
party. I've seen startups where the prototype is something that any developer
could kick out in a week. I've seen others where the prototype took months of
effort by people with very specialized knowledge.

