
Ask HN: How to handle equity for small project with lots of cofounders? - danielandrews43
I&#x27;m a college student working with 5 other people on an app, 3 of us on iOS, 2 of us on Android, and 1 person on a web portal (so 6 people total). We are trying to figure out how to distribute equity and how the company should be structured.<p>Currently, we are thinking about doing something where every 40 hours of work is considered 1 &quot;share&quot; of the company, with all work being valued equally. We will first spend money on the company as needed, and then each person will receive any profits in proportion to the number of shares they have. This way, if any of us decide to leave we won&#x27;t feel cheated out of all the hard work we have put in.<p>So if I have 3 shares, and there are 10 shares in total, with 1000$ in profit, I will get 300$.<p>I have some problems with this main structure as it can be hard to figure out who is going to be making decisions in terms of how to spend the company&#x27;s money, and how final say on direction&#x2F;vision is decided, as we have no person who is a clear CEO or executive.<p>So far I have just been making most of the calls as I sourced our first client and it was my idea, but I&#x27;m not sure if that is the best way to handle things.<p>I&#x27;m looking for any advice on how to set up equity and how to decide who is making the larger decisions for the company. Thanks!
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elviejo
This was Joel Spolsky suggestion. In the past.

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

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relaunched
Run. Seriously. Here's why:

You are running a business, or at least trying to. Ruling by consensus doesn't
work, eventually. And that's when shit will start hitting the fan.

The work you've done isn't nearly as i.lortant as the work you'll have to do.
It's unclear if you have the right skill sets to get to the next level now.
And the skill sets you may or may not have, but will need, are worth way more
than the nth developer. And if you all don't see why building to support 3
channels first, when you don't have customer validation is a problem, you
don't have the right skill sets

If you are all friends now, you won't be soon; no matter what path you choose.

My advice, find someone who has the experience with running early stage
startups and figure out what terms they would need to step in. That should
give you an idea of a reasonable way to structure the deal.

Some things to note, the CEO is timely responsible and that's worth way more
than each incremental dev, in terms of equity.

Profit-sharing is a great idea. But, it doesn't have to be tied to equity per
se.

Figure out if you are all serious about turning it I to a start-up or just
having fun coding. Then, go from there.

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muzani
That's a very big team. It gets complex past 3-4 people.

I wouldn't split it by hours worked because it screws over the most effective
people. Some parts of the code are harder than others. I would argue that
Android is more work than iOS and yet you have three on iOS and two on
Android, meaning the iOS guys are lifting a little less. The web portal guy
could be doing most of the heavy work, especially if he's doing back end too.

There's also sales. Sales is painful if it's B2B and yet possibly the most
important role in a tech heavy team.

With a team that size you also need someone who is handling the non-deep
tedious stuff - company registration, dealing with partners, investors,
project management, filling forms.

And you definitely need a product manager, a visionary who has high level view
and makes sure everyone is on the same page. This can be the CEO too.

The CEO doesn't necessarily need a larger share.

I would honestly just split equity up equally. Extra results will go in the
form of bonuses and salary. You probably have to assign someone as the
mediator for this, but this can be done democratically too. Maybe even write
up some contract to agree on how bonuses are paid out.

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tucaz
Unless any of you have done work that is not proportional to the others (for
more, or for less) I believe that everybody should get the same amount of
equity.

The leaving problem is easily fixed by adding a vesting period where no one
would be actual owners of their part before N months/years.

Payment should be also equal. Otherwise, at some point resentment is going to
build and things might get weird and start to fall off (I speak from
experience). If one person adds more money at the start of the company they
should be repaid (reimbursed) as soon as there is company money. Unless, once
again, it is a disproportional amount of money. If that's the case some other
arrangement (maybe more equity?) should be made.

Leave the unequal payment thing for when (and if) things go really well and
the company actually has profits to distribute. At the beginning, everybody
gets paid the same as salary and it's also all or nothing. Unless all involved
get paid, no one gets paid.

When it comes to deciding who calls the shots I believe it doesn't really
matter unless there is someone who clearly is a better fit for it. Also, being
the CEO or giving directions to others doesn't mean someone is more important
than the others. It just means that it is a different role.

My last bit of advice is about all the other things you guys didn't think
about. Especially when it comes to things that can go bad. I would leverage
the fact that this is the beginning and everybody is committed and excited and
use this time to think about what to do when bad times come (they will). You
should never get into a contract without knowing how to leave it. Find a
shareholder agreement and use it as a base to come up with your own rules and
agreements.

