The Founders’ Pie Calculator

26 Aug ’05

Frank Demmler tackles the tricky problem of allocating equity among co-founders:

Several weeks ago, we took a look at the founders’ pie. I noted that frequently the founding team divides 100% by the number of founders.

I also cautioned that this is the WRONG WAY!

I then went on to identify the factors that should be considered when making these decisions.

Since then, I have had several people tell me that while what I wrote certainly made sense, it wasn’t very helpful. They said that when it came to “rug cutting time,” absent an alternative method, equal shares was the only method that seemed to be “fair.”

As a public service, I have “invented” a Founders’ Pie Calculator. As you will soon see, this calculator is not particularly profound. In fact, I’m sure I haven’t “invented” it, but, at the same time, I have never seen it before. [Caution: perhaps there’s a fatal flaw that I haven’t considered.]

Its primary benefits are that it provides a way to quantify the elements of the decision making process, and that it appears to be logical and fair.

Via Anthony Cerminaro.

Previous post:

Next post: