How to decide the stake in a startup? what would be the crtieria for deciding the stake?


1

I have a scenario: The following entities come together for a software product startup.

A. 2 software architects:
The product/software architects put in lot of effort, do the product feature comparisons online, requirement gathering, create the IP and functional and software architecture, features, design and overseeing the development.

B.
1 market specialist who had been with the industry for 30 yrs. He brings his network onto the table.

C.
1 consulting company in this industry. Also this company is ready to invest on coders as needed,but the core IP has to developed by the 2 software architects. This company brings resources, experience and also can push the product. This company spends 2-3 hrs bi-weekly to track and coordinate.

In this scenario, what should be suggested criteria for deciding the stakes between the developers, market specialist and consulting company?

Equity

asked Sep 13 '11 at 23:26
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Chetana
6 points

1 Answer


1

Well, the first thing would be review this very well written piece (don't forget to go through the comments as many are quite insightful): Forming a new software startup, how do I allocate ownership fairly? I would consider all of the three people and one company to be founders, so I would tend to divide the initial equity stake evenly. Do not overlook the important of keeping everyone motivated and feeling like everything is fair. It seems like everyone (including the company) brings some serious stuff to the table. I'm assuming here that the company is going to fund the development out of their own pocket - that part's not too clear and can make a major difference.

answered Sep 14 '11 at 00:52
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John
1,194 points

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