5 Keys To Negotiating Your Fair Share Of Any Startup

Gates-and-BallmerI always tell entrepreneurs that two heads are better than one, so the first task in many startups is finding a co-founder or two. You need to find the skills or experience you don’t have in business, technology, or money. So the first question I usually get is what percent of the company or equity is that person worth? Giving a co-founder a salary won’t get you the “fire in the belly” you want.

The default answer, to keep peace in the family, is to split everything equally, but that’s a terrible answer, since now no one is in control, and startups need a clear leader. The next default of waiting until later is equally bad, since partners who bow out early will still expect an equal share of that first billion you make later.

Now comes the reality check. Just because it was your idea doesn’t mean you “deserve” 90% of the equity. The value in a startup is all about tangible results, so I see no equity value in the idea alone. Thus the real discussion must start with who will be doing the work, providing the funding, and delivering results. Each co-founder should get equity for value, based on these key variables:

  1. Lived a key role in a previous startup. Building a new business is quite different from an executive role in a mature company, so people from these backgrounds are often a liability. Value is embodied in previous success with investors, proven problem solving ability, and having built and executed a business plan with minimal resources.

  1. Experience and connections in your business area. Textbook knowledge and academic degrees don’t count here. Value factors include your related product breadth and depth, relationships with thought leaders, key vendors, and large potential customers. Building the product may be the easy part of your startup challenge.

  1. Key to required patents or trade secrets. In many cases, one of the co-founders may bring some work in progress that can be patented, trademarked, or copyrighted. Your idea is not intellectual property yet, so it has no inherent value. Every previous experience filing and winning a patent is a rare and valuable asset.

  1. Level of responsibility and time allocated. Co-founders only able to work part-time, with responsibility and major income sources elsewhere, don’t carry the same risk as others with more operational responsibility. Less dependence or startup success, or more cash compensation, generally means less equity assigned.

  1. Amount of venture funding provided. Investors may not be called co-founders, but they always get equity, commensurate with their share of the total costs anticipated, or share of the current valuation. The challenge is for real co-founders to keep their equity percentage above 50%, or they effectively lose control of operational decisions.

If none of these five items is a clear differentiator in your case, a logical approach would be to assign each an equal weight of 20% of the total, and partition the total equity based on each co-founder’s correlation to each variable. A friend or family investor thus might get 20% of the equity, even with no business activity contribution.

Because these considerations can be quite complex, very emotional, and have long-term implications, smart entrepreneurs don’t hesitate to get some legal advice at this early stage, in drawing up an agreement document to be signed by each of the co-founders. Obviously it should be amended later, as roles are more clearly defined, and execution proceeds.

Even with an agreed initial equity split, it’s smart to have Founder’s stock actually issue or vest over a period of at least two years, on a month-by-month basis. That way, if one of the partners disappears, or their role changes, a portion of the equity can be re-captured and reallocated to the other members. Other common terms, like the right to re-purchase, should be investigated.

In all cases, roles and titles should be clear, but not necessarily tied to any given percent of equity. In other words, the CEO need not be top equity owner, but should be the one with the most business skill and experience. The CTO of many technical startups was the original founder. The CFO may have a major financial background, but might be a minority owner.

Of course, all co-founders need to remember that allocated percentages will be diluted as angel and VC investors are brought in. Keep your wits about you to make sure that dilution is done equitably and evenly. Naïve cofounders have found themselves squeezed out in some well-known cases, including Facebook.

But don’t get greedy. It’s the power of the team that makes the business. Major equity in a startup that goes nowhere is not my idea of fun.

Martin Zwilling
Startup Professionals Musings

Share Ventures, an LA-based studio for company creation, is MoviePass co-founder Hamet Watt’s next act – TechCrunch

Share Ventures, an LA-based studio for company creation, is MoviePass co-founder Hamet Watt’s next act  TechCrunch
“startups when:1d” – Google News

Peer Support and Self Management Saturday’s – A Safe Place to Vent, Seek Emotional Support, Share Self Management Techniques and Experiences, or Just Rant

Welcome to this week’s Peer Support and Self Management Thread.

This is a Safe Place to Vent, Seek Emotional Support, Share Self Management Techniques and Experiences, or Just Rant.

The goal for this thread is to help one another manage mental and physical health so we can more easily find success.

We all struggle sometimes and it is important to recognize that the struggle is part of the journey. The important thing is to learn how to overcome that adversity to grow and succeed.

Be tactful and classy in how you vent your feelings and share your frustrations. Act in a mature manner.

Ask questions, share experiences, and be there for one another. Practice empathy in giving advice and remember that what worked for you isn’t guaranteed to work for others. Make suggestions, not demands of others.

#Because this is meant to be a safe place to support emotional and physical health there is a zero tolerance policy in effect. Be KIND. Be sure to report any conduct that is in violation of that key tenet.

You can also find more support using instant chat on the /r/startups discord.

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Startups – Rapid Growth and Innovation is in Our Very Nature!

Wednesday Social Club – Share What Events You Are Attending This Coming Week

Welcome to this week’s Social Club thread.

Share what events and meetups you are going to so we can discover new ways to be social together offline and help grow your local community.

Focus on sharing events that are happening within the next 7 days of this date of this submission. Anything that falls outside of 10 days will be removed, no exceptions.

No duplicate posts. If you happen to be attending an event that is already posted, leave a comment to inform the community that you will also be there.

If you are hoping to organize something on your own, outside of an existing event, feel free to use this thread to rally some people together to meet up.

Please use the following format to share an event:

Event Name and URL: Location: Event Date: Event Time: Event Description: Event Cost: Discount Code: [if applicable]

Please use the following format to organize people to meet up together:

Location: Purpose of getting together: Suggested Places to meet up:

You can also find more support using instant chat on the /r/startups discord.

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Dental Implants Market Size, Share, Growth, Trend Key Reasons for The Present Growth, Demand and Upcoming Business Opportunity with Detailed Foreseen To 2027 | Top Companies – DENTSPLY Implants, Straumann AG, Bicon Dental Implants, Anthogyr, KYOCERA Medical Corporation. – Bulletin Line

Dental Implants Market Size, Share, Growth, Trend Key Reasons for The Present Growth, Demand and Upcoming Business Opportunity with Detailed Foreseen To 2027 | Top Companies – DENTSPLY Implants, Straumann AG, Bicon Dental Implants, Anthogyr, KYOCERA Medical Corporation.  Bulletin Line
“sweden startups when:7d” – Google News

Manic Mondays: Support To Get You Through The Week: Share What You Need Help With, Job Postings, For Hire Offers, or Resources

Welcome to this week’s Support Thread. Please refer to the below suggested formats to get the most out of this thread.

Need Support?

Please use the following format to seek support:

SUPPORT REQUEST

What I am working on: What I need support with: Why I need support with this: My questions to the community: Requested Resources: Relevant URL: [if applicable] Additional Comments: Please add any additional comments that may provide more context around what you need support with so others can provide the most relevant support or guidance to you.

Job Provider?

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HIRING Company Name and URL: Job Title/Role: Employment Type: [Intern] [Contract] [Part Time] [Full Time] [Remote] Job Description/Responsibilities: Necessary Skills and Experience: Requested, but not necessary Skills and Experience: Job Compensation: Willing to Relocate New Hire: [yes] [no] Job Listing URL: Additional Comments:

Please add any additional comments that may provide more context around the job listing to make it easier for the right people to apply.

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Please use the following format to post an offer to work :

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Do not forget to explore the /r/startups discord. We have many relevant channels to seek support, post job listings, share for hire offers, and share resources. You can also find more support using instant chat on the /r/startups discord.

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Belling the cat: Online ad revenues can help pay for journalism. Australia tells Google, Facebook to share – The Times of India Blog

Belling the cat: Online ad revenues can help pay for journalism. Australia tells Google, Facebook to share  The Times of India Blog
“startups when:1d” – Google News