Frank Demmler tackles the tricky problem of allocating equity among co-founders:
Several weeks ago, we took a look at the foundersâ€™ 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 wasnâ€™t very helpful. They said that when it came to â€œrug cutting time,â€ absent an alternative method, equal shares was the only method that seemed to be â€œfair.â€
As a public service, I have â€œinventedâ€ a Foundersâ€™ Pie Calculator. As you will soon see, this calculator is not particularly profound. In fact, Iâ€™m sure I havenâ€™t â€œinventedâ€ it, but, at the same time, I have never seen it before. [Caution: perhaps thereâ€™s a fatal flaw that I havenâ€™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.