Equity Stake Decision


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I wanted to get people's feedback on what you think is a fair equity split for my given scenario.

I currently have a product where I originated the idea, fund the development/hosting/creation of the business/marketing materials, perform daily operational tasks, drive business goals, perform sales, manage the team, do the development and responsible for architecture of the site. My co-founder currently has done the UI designs (images) and posters/brochures for an expo we attended. I am responsible for the actual development of the wire frames, backend services, and payment/procurement of posters/brochures.

Given what I mentioned, what do you think the equity split should be?

Thanks.

Equity

asked May 5 '11 at 17:10
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John
161 points

1 Answer


1

I believe a arbitrary figure like 80:20 etc will not help you as your industry/domain and the exact scenario is not clearly known to the ones who answer this question. (Do try to elaborate further in your comments)

With the inputs you have provided its quite prominent that you have been doing most of the bulk lifting. This might not be the real case (as we have a tendency to believe we work harder than others). Whatever the case be I sugget tinker over the following points

  • What is the level of knowledge each partner brings to the table
  • Level of risk he is ready to take
  • Amount of time, mney and resources ready to pool in
  • Future of the business and the future contribution that you see he/she will make
  • Whether the partner is replaceable
  • Is he demanding an equity split to stay fair, or to exit when the startup needs him the most

The split has to be fair enough for the other partner to stick with the venture. If its a race to get the biggest piece in the pie, your startup is ready to be doomed.

Also while splitting the equity if your startup is in a nascent stage and you look forward to investments later do ensure that both of you are equally ready to reduce your stake to get additional funding required.

Do try to take the partners input so that you realize the amount of effort he puts in as per him! Do have a mediator if things start going awkward

Cheers

answered May 5 '11 at 23:18
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Chanda
61 points

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