
How should I split equity? - lineket
I was approached by a friend to who had an idea for an app. I told him I would build the app.<p>The App is almost done and we plan to go to market on mid May.<p>He claims he already spent 20k on the following:
- Wireframe Designs
- Branding and Logo creation
- Customer Research study (user testing)
- Blog and content creation
- Landing page creation
- Marketing Campaigns (google ads, facebook, instagram, etc)
- Hosting
- Legal costs (trademark patent, incorporation, minute book, etc<p>And now is offering me 30% equity in a vesting schedule of 3 years with a 6 months cliff.<p>I believe a fair split is where I have at least 50% of the company.<p>Is he offer fair since I&#x27;m the one actually building the whole app? What is your opinion on this situation?<p>Other notes:
- He has incorporated already and would be issuing new shares to me
- He doesn&#x27;t have access to the source code
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_ah
Technical people tend to overvalue their own contributions. User research,
hiring, and leadership is a very real thing and has real value. Your friend
recruited you, not the other way around... a very big value he provided is
that he convinced you to join, and will presumably convince others to join in
the future.

When you say _I believe a fair split is where I have at least 50% of the
company._ , you're saying that a split of 51%, 75%, or even 90% to you feels
equitable. To state the obvious, if you have more than 50% it is no longer
your friend's company, it is your company. That's not going to happen.

Let's turn this around for a moment: What if your friend got some VC money.
Let's say he got a tiny seed round: $200k for 20% pre-money ($1M valuation).
Now let's assume that you've invested 3 solid months building this app at
$100/hr as a contractor (so, $50k -$60k dev work all-in). This implies that
you've earned 5%-6% equity in the company for work already done. Your friend
wants you to stay, to he offers an extra 5% for a round 10% equity. But wait
you're a founder! you need more than that! You argue and thumb-wrestle or
whatever and he agrees to 20% on a 4-year vest. This is probably fair.

By that analysis, 30% over 3 years is _incredibly_ generous. But only you know
your own situation.

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PragmaticPulp
> The App is almost done

I assume you've learned the importance of discussing these things up front. :)
At this point, you should do your best to drive for clarity and written
contracts before you continue your efforts. Your cofounder doesn't sound
necessarily unreasonable, but just in case: Make sure you get everything in
writing. Don't allow for infinite delays or vague future promises.

Most important question right now: What, if any, agreements do you two have in
place? Did you make any agreements, written or otherwise, before you started
building the app? I assume you used some of the assets he provided (wireframe
designs, branding, logo) in the process, so it's too late to completely
separate your app from his reach. Unless you're geared up for potentially
years of legal challenges, ignore any advice to cut and run with the source
code.

Second: What are your expected roles in the company going forward? Will he be
running the company by himself and acting as President/CEO? I know you put a
lot of work into the app, but an app alone is usually not sufficient to be a
functioning business. If most of your work is done and his is just ramping up,
then a 70%/30% split doesn't seem unreasonable.

I suggest you clearly define roles and expectations for both of you going
forward. This will clear up a lot of the split.

> I believe a fair split is where I have at least 50% of the company

Greater than 50% means you're in charge of the company, effectively. Are you
interested in running the company yourself? If not, pursuing greater than 50%
ownership is not for you. Even in situations where cofounders agree to be
equals, it's still often recommended to have one founder at 51% and the other
at 49% to make it clear who gets the final vote. Do you want that to be you?
Would he still be onboard if that was you?

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partisan
Split the shares 50/50\. Convert the 20k into senior debt that will be repaid
on a schedule. If he believes in the vision then he will have his investment
back and will have the benefit of your unpaid work.

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gus_massa
How much time did you use to write the app? Is it possible to just burn the
code and forget about the project?

As other comment said, get everything in written. Get a layer to read the
agreement before signing.

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bitfield
Without the app, he has no business. I'd say you're in a strong position to
ask for at _least_ half the shares (not options). If you don't get them, take
your app and sell it elsewhere.

~~~
lineket
I did sign an NDA, so not sure about selling somewhere else. but thanks

