

Cutting Up the Founders' Pie - pchristensen
http://www.andrew.cmu.edu/user/fd0n/35%20Founders%27%20Pie%20Calculator.htm

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andrewljohnson
As a CMU alum, I hate to bad-mouth a professor there, but this guy doesn't
seem to understand the psychology of start-ups.

This method may lead to an equity split that seems to reflect the inputs of
the founders, but could potentially, and will probably, demotivate the
founders who get the smaller pieces.

Does it really seem like a good idea to tell the people you are going to be
working with non-stop for the next 3-5 years (hopefully) that you are twice as
valuable as they are? It seems like that's going to be a self-fulfilling
prophecy.

When I started a start-up this year (www.trailbehind.com), I had the idea,
wrote the business plan, raised the money, coded most of the original site,
and then split the business right down the middle with my co-founder. Because
I want her fully and completely interested in making the site work, and not
thinking that this is just some job or somebody else's project.

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DaniFong
It seems to me as if the ideal cofounder is one whom:

a) You very nearly can't, or wouldn't do without.

b) Is working as hard as they can to get this thing going.

c) Is totally committed.

d) Can do rare things that you cannot yourself do.

and

e) Feels the same way about you.

In such a circumstance and nearly equitable split is almost certainly the best
option.

If you don't feel the same way, there might be some kind of way to split the
equity, but it seems much, much harder to get a good outcome. Then again, you
probably shouldn't be founding with such a team? I did; and ultimately the
other founders bailed or fizzled out, and I had to let them go.

PS: Hi! How is trailbehind going?

~~~
andrewljohnson
TrailBehind is going really well! Our big news recently was winning an fbFund
grant, ands we're going to have a cool launch tomorrow.

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danteembermage
I just recently saw a presentation by a guy out of Harvard at the University
of British Columbia. He found the a full 1/3 of High-Tech startups divide the
equity equally and that an equal division was a predictor of future trouble
later on. Insert generic correlation is not causation critique here, but still
the results are interesting. We were under direction not to distribute the
paper otherwise I would link to it.

~~~
paddy_m
I'd be really interested to see that presentation. link?

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tworats
This is the caricature of clearly-produced-by-an-academic. The idea that
founders would use a spreadsheet with relative weights to divide up the pie is
so counter to what actually happens it's comical.

I do agree that dividing 100% by the number of founders is wrong. Figuring out
the divide does not happen via spreadsheet, however.

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tyohn
I like the idea. If one founder is working harder/more/intently or taking on
more responsibility I think the reward should be equal to the "effort"...

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jbyers
"Business Plan Preparation" is a line-item? In my mind the credibility of this
document is already shot for this audience, and we're not even half-way in.

Two founders? 50/50. If you find a co-founder that you see eye-to-eye with and
you have non-overlapping responsibilities, you can make it work. I'm an equal
partner in Wikispaces, and it works. The alternatives are worse. Get over the
theoretical deadlock case, if this happens for real, you're in serious trouble
regardless of the split.

Three founders? Find a split that works based on background, past and future
contribution, etc. Use a spreadsheet if it helps, but be prepared to really,
deeply debate this. How the three of you handle this early discussion is a
good indicator of how future -- possibly much more difficult -- discussions
will go.

Four or more founders? No idea. Probably trouble.

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chaostheory
overall I like the article and I think it's useful... but an idea having the
same weight as committment and risk (or even responsibilities) - that's a joke

"Genius is 99 percent perspiration and 1 percent inspiration"

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emmett
Maybe it's because I'm a naive (second time) entrepreneur but something about
this argument seems wrong to me; I can't put my finger on what it is though.

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staunch
It's a technical approach applied to a non-technical issue. That's the problem
I see.

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jyothi
brilliant. Couldn't have been said better.

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sgman
Does it really matter seeing as if the product takes off, everyone will get
rich, and if it doesn't, no one will? Seems like the time would be better off
spent coding.

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paraschopra
This document has been posted on HN now for the trillionth time

