

Ask HN: How to divide ownership of my new startup? - sloopjohnb

I'm founding a startup! Yaaay! I have some friends who like my idea and want to help me. However, I have no money to pay them, so I'm guessing that I'll need to give them a piece of the action. I don't want to get screwed, but at the same time, I don't want to be perceived as a jerk. What is the most fair way to divide up the pie? What's the best way to approach this discussion without coming off as a jerk?<p>The idea is mine, I came up with it myself.  I'm a developer, so I'll be writing a lot of the code. I have at least one friend who's really excited and willing to commit a fair amount of time to the project. I have a couple other friends -- a developer and a designer -- who are interested as well. I'm imagining I'll have to give everyone some kind of stake in the company, otherwise they really have no reason to work on it. I've never done this before, and don't even have any idea how to approach the situation.<p>The pitfalls are obvious. On the one hand, I could give someone a cut, and then they don't contribute, but they still own a piece of the company. I could give them too big of a cut, and wind up screwing myself. If I don't get anything on paper, someone could steal my idea or my code. Or they could come out of the woodwork somewhere down the line and claim that they're owed something, and I could find myself in a protracted legal battle, a la Facebook. And if I completely fumble this conversation, I could wind up alienating my friends.<p>How much of a cut do I give to my friends? At what point is it necessary to get things on paper? How do I even approach this (kinda awkward) conversation?<p>I'm meeting with the other (committed) developer tonight, and we're supposed to start planning the project. It will be our first real planning session, and I'm imagining we should talk about this stuff.<p>I appreciate any ideas, resources, and reading material you have to offer. As I mentioned, I have never done anything remotely like this before and have no idea how to even approach the situation.
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lacker
Have all the full-time people split the equity evenly. Have vesting to protect
you if people don't contribute - four years with a cliff at one year is good.
Founding a startup is so stressful, if people are doing it part-time it
probably will not be very helpful, so try to get everyone either full-time or
just an "advisor" role where they get < 1% of the company.

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fvryan
Definitely discuss this earlier rather than later.

How much equity to give is very different for every situation.

The fact that the idea was yours isn't worth a whole lot in terms of equity.
Maybe it gives you a 5% premium.

More importantly is how much work your friends are putting in. And if they are
leaving their jobs to work on this project.

To protect yourself you will want them to have "vesting" meaning their equity
accrues over time.

A really easy way to apply vesting is to just promise them 0.25% - 3% equity
for each month they work on the project and then have a cap of 20%, 30%, 40%,
50% or w/e you decide. Typically vesting periods can last 3-5 years.

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fvryan
Also read this.

[http://www.geekwire.com/2011/wrong-
answer-5050-calculating-c...](http://www.geekwire.com/2011/wrong-
answer-5050-calculating-cofounder-equity-split)

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profitbaron
You should have a look at Joel Spolsky's answer:
[http://answers.onstartups.com/questions/6949/forming-a-
new-s...](http://answers.onstartups.com/questions/6949/forming-a-new-software-
startup-how-do-i-allocate-ownership-fairly/23326#23326)

