
Show HN: I wrote a co-founder equity calculator over the weekend - alain94040
http://foundrs.com/calculator/index.php
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rokhayakebe
Not cool the way you got to the front page. Imagine if everyone did the same.

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kloncks
Elaborate?

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andyn
Presumably he's referring to the plethora of comments below from accounts
created within the last hour whose only comment is a one or two word praise
for this submission.

It smells of sock-puppetry, but odd considering this is exactly the submission
that would appeal to this audience.

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redthrowaway
I suspect more meatpupptetry, as in promoting on twitter/facebook and asking
friends and followers to come and leave feedback and vote up the submission.
Nothing wrong with that, really.

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getsat
Thread upvotes from new accounts shouldn't count at all or should be
significantly reduced in value to prevent this. Stories should be upvoted
because they're interesting and relevant, not because the submitter has a
social network upon which to draw.

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redthrowaway
>Stories should be upvoted because they're interesting and relevant, not
because the submitter has a social network upon which to draw.

That's only a concern if you consider yourself an HN'er first and entrepreneur
second. If your goal in submitting is to provide high-quality material for HN,
then you wouldn't use meatpuppetry. If, on the other hand, your goal is to
drive traffic and you don't care about HN, then you use whatever means you
can. It's the same for people who spam craigslist trying to get users. They're
polluting craigslist and lowering it's quality, but they care about traffic,
not craigslist. If it's acceptable to do that (and most startups do), then
it's acceptable to game HN.

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getsat
It's not acceptable to do that, it's just a really difficult problem to solve
for CL.

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alain94040
I'm sure there are plenty of corner cases that will lead to absurd results,
but let me know if this is overall worth improving or not. Thanks!

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martinpannier
The quality of comments on HN seems to be falling pretty quickly.

It's a good idea. I think technical founders are probably a little underrated
in your model.

Otherwise, I don't know if equity calculators are a great solution in general.
They just tend to shift the problem from the importance startuppers give to
different topics to the importance a program gives to these topics. On top of
that, discussing non-round amounts >10% (such as 19%, 23%, etc.) just gives
much too much importance to a few %, which paradoxically makes discussions
tougher down the road. Better to round things up (70/20/10, 60/40) and just
leave things at that.

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alain94040
I didn't implement rounding in the first version for a very simple reason: in
the case of 3 equal founders, the answer should be 33.33/33.33/33.33. So
rounding to the nearest 5 or 10 is wrong. If anyone has a quick algorithm that
will provide "smart rounding" following fractions, I'm interested. Otherwise,
I'll figure it out.

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phlux
Personally I think that companies with 3 equal founders need to get 30 each
with 10 reserved for initial funding/employees/others.

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nitrogen
Is it really necessary to allocate less than 100% of initial shares when
future rounds of funding and option grants can be handled by diluting the
existing shares?

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ilamont
This was very interesting. I ran a simulation based on a proto-startup I am
involved with, and the suggestion at the end "maybe X should be CEO" was right
along the lines of what I was thinking.

But I also saw that it is quite easy to game. On the other hand, so are real
equity discussions.

Curious to hear what experienced entrepreneurs think about this tool, and the
estimates it gives.

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a5seo
Mostly accurate for me.

I've been talking to two developers about joining a bootstrapped startup I've
been working on... I'm full-time, MVP is 80% of the way, and its in a space
where I have domain expertise, industry connections, and fundraising contacts.

Anyway, long story short, it was spot on with respect to the split between me
and 1 technical co-founder, but sort of missed fact that there's diminishing
return for adding a second somewhat overlapping person.

Also, it doesn't handle the case where different people are working in
different proportions (some full-time, some heavy part-time, some light part-
time). Would be useful to have the ability to create a timeline to reflect how
many hours per week people will be working and when they would go full-time.
If you really wanted to go nuts, you could add in some modeling to account for
people who may work way below their market value, and how long that would go
on for.

Good effort, overall.

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zngtk4
I found this a pretty interesting and useful way to look at this.

One additional factor I would love to see: situations where one person is
coming on a "late" cofounder (e.g. a basic product has already been made, e.g.
with outsourced Eastern European developers, and there is some minor
traction).

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dlevine
I actually came into this situation with my current startup. My partner had
the MVP built by contractors before I came on. He is completely BD/sales, but
he had a close advisor who helped him get the product built.

Honestly, this is kind of a nuanced situation. First of all, it depends how
long the first guy has been working on the project, and whether he was doing
it full-time or on the side. Also, it depends on whether the MVP has
product/market fit, or whether it needs to pivot and be re-built before it is
really what the customers want.

Overall, without knowing what weights this "calculator" assigns to various
variables, it is pretty much useless. Also, as much as technical founders want
a formula for everything, equity split comes down to a negotiation (especially
if founders come on at different times).

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nhashem
I tried filling this out based on a situation I was in earlier this year
(never got off the ground, etc) but basically it came down to:

Me (only technical person, responsible for implementing core product, not
familiar with industry space): 27%

Co-Founder 1 (main "business guy," came up with the idea, had lots of
connections to angel investors, would be staying at his current job): 49%

Co-Founder 2 (second "business guy," lots of operational experience in
industry): 23%

Co-Founder 3 (not really a co-founder, someone that helped us with some legal
and accounting tasks and who expressed an interest in joining as employee #1
if we got any traction): 1%

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invalidOrTaken
I think it's great the way the rule of 72 is great: awesome for a quick sanity
check, terrible to become the sole input. I'm pretty sure that's exactly what
you were going for; great!

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alain94040
Thanks, you are of course correct. No one in their right mind would blindly
say "the calculator says you should get 23% of equity, that's what you'll
get".

Rather, it's a way to start asking questions among founders: "how come, if I
use this calculator, John gets so much? I thought he wasn't that important,
let me try to understand what is going on."

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shoeless
This doesn't take into account much in the way of risk. Really, those that
take the most financial and legal risk (e.g. if the company goes under, who's
on the line), should have significant impact on equity. Part-time vs. full-
time does cover some risk.

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sequoia
This is probably the first "built over the weekend" project that I've seen
here that I actually believe the person built it over the weekend. :) Looks
nice.

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a5seo
I would love a tool that manages the cap table over time with the ability to
model out various funding scenarios.

Imagine if such a tool could then keep track of who has executed their options
and who hasn't, even down to managing the transaction.

I think Silicon Valley Bank offers their customers a tool like this, but I
don't think it's something any small startup can get their hands on.

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ColinWright
I got this:

    
    
        Not Found
    
        The requested URL /calculator/old-browsers.html
        was not found on this server.

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joshfinnie
Same here (running IE6 at work).

I am assuming this is where "old" browswers are redirected too, but it is
obviously not installed properly.

Works fine on my Moto Droid.

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Shenglong
As a sanity check for myself: For those of you who've done start ups with two
people, do you not usually go 50/50?

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adamt
I've done about 4 startups now - and always chosen to split the equity evenly
between the founders, despite the fact a tool like this one would have
suggested I would have been 'worth' more than parity.

What this tool forgets is that a startup is a tough emotional journey and an
emotional roller-coaster. In every startup's life there are moments of
dispair, moments when it will all seem like too much effort. The ability to
come through these as a team is as, or arguably more, important as being a
brilliant coder, or someone having great contacts. In order to get that team
spirit and togetherness that is key to the company being successful, I think
it is better to split the equity more evenly.

Or - to put it another way - in most cases, founders shares end up being worth
almost nothing (statistically most startups never get a proper exit). It's far
more important to look at what will increase the chance of that exit, rather
than how much you will own at exit.

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rdl
As a validation data point, it came to within 5 points on the actual 3-way
split at my company.

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mcdowall
Rather confused that it stated I should get 85% equity yet I was a weak CEO,
bizarre

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teamlaft
Just tested it out and it's pretty cool. Obviously not a be all end all, but
tested out some situations I'm in and some which my friends are in, and it
gets pretty close for my examples of teams of 2-4.

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elb0w
I dont agree with this calculator, you should provide references, research,
concepts, reasoning. I cant fathom someone using this seriously, plus the fake
accounts is a little lame for a HN post.

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ragmondo
My 0.02€ - can it include a way of proportioning "work to date" - ie let's say
the startup has been incubating for 2 years, and it's now found 2 co-
founders... How do I model that ?

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tuhin
[http://www.andrew.cmu.edu/user/fd0n/35%20Founders%20Pie%20Ca...](http://www.andrew.cmu.edu/user/fd0n/35%20Founders%20Pie%20Calculator.htm)

A similar tool in Excel.

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rokhayakebe
Unrelated but related: can the same thing be done for businesses wanting to
run Groupons to see how much to give.

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a5seo
I think you pretty much takes what Groupon will give you.

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brianbreslin
so in a 2 person startup the idea person if he only brings the idea, gets 7%?

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adelagab
super, genial, what is incredible is that it confirm out first estimation.

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phlux
I think its perfect. It calculated what I had long thought was a fair split
based on what I have done in the past.

One thing that would be interesting would be to add incentivized milestones:
"this person is critical to getting MVP/first customer/launch/funding"

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pitdesi
Can you share the methodology?

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alain94040
I will, but I was first looking for some feedback on scenarios, see how far I
can take this before explaining how it's done. Think of it as a double-blind
experiment: if I told you today how it's computed, you would object to it,
without trying it out. If you first try it and think it gives decent results,
then you'll be more open to discuss the internals.

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davidw
It'd be nice to be able to play with the weighting.

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alain94040
Do you want to change individual weighting for the questions, or rather
specify at the beginning something like "this startup is in the B2B space,
therefore sales will be the major challenge", or "R&D will be critical",
etc... I don't see how you could weight questions, but you could weight high-
level sectors. Does that make sense?

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davidw
Ultimately, as a geek, I want to see what makes the thing tick, and think
about how that may or may not relate to my situation. Also, unless you have
access to statistics that most people don't, your numbers may simply not be
any more accurate than our own estimates.

Making it spit out a google spreadsheet or something would be a neat trick.

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snampall
Primitive but Cool. Is is weighted calculation or simple..

