Me (software developer) and my co-founder (UI designer) are looking forward to build a SaaS startup. I would usually lean towards a 50/50 distribution, but in this particular scenario, the application we are building requires much more software development work than user interface design - at least, that's my perception. Furthermore, I was the one who came up with the initial idea and have a clear vision of where we are going. However, there is the possibility that my partner could bring some capital through a personal connection.
Do you think it would be fair for me to get a bigger share of the company assuming my partner doesn't bring the said capital?
If he is able to invest capital in the company, what would be a fair way to determine how much equity we each get ? Maybe estimate how the work load will be distributed among us and convert the capital into "work load" (capital / hourly rate) ? This is delicate step that I'd rather skip, but it is important to put all our cards on the table beforehand in order to avoid future conflicts and frustration.
It all depends on what you mean by "fair." Here's a few mental experiments to help you think about it:
To the specifics you raise above:
There is no right answer. But I'd encourage you to think long term and design an equity distribution that: helps all involved to make good decisions for the company; fairly compensates for effort, risk, and talent; and doesn't introduce extra tension either in failure or success. Finally, I think you're asking the wrong people. Ask your partner. If you can't agree on what's fair, it's probably not the right partnership.
Is the only thing he brings to the table his skills at being a designer?
If yes, he shouldn't be a co-founder at all. Establish a fair rate, and then if you want to pay him in options/warrants/whatever then agree on a price.
You mentioned there may be a capital contribution from your friend.
If you could address additional factors such as:
A better understanding of what each of you are really putting into this venture will help you reach a better answer as to what will be the best equity split.
I have a post on a equity calculations you could use when you have got all the variables in place.
If you have the idea and vision, I'd say you keep more than 50%. You can always confer with him and respect his ideas, but you need to be able to make quick calls and not always have a voting session for every single thing down to which coffee machine to get for the office; keep more than 50% if it's your idea, you plan on putting in more hours, and do most of the work. Otherwise executing your vision could get cumbersome and slow.
I agree with newyuppie to keep more than 50% if you have the idea and vision. I have a friend who was working for a partnership that was doing well. Then the 50:50 partners could not agree and the company, growth and business came to a standstill. He quit as the working climate was not good and he told me if he had a business he would not go into a partnership. I do believe partnerships work but the partners must be able to work things out.
You have an idea and a vision for how it is going to be carried out. You anticipate doing more work due to the programming needs verses the design needs. It doesn't sound like you want to give 50% of the power to this other person nor have you given any evidence that he actually wants half. If he is able to bring in this money, who is going to decide what to do with it? Wanting to be fair is a great trait to have in a partner, but fair is not the same as equal.
You are not distributing equity based on how much work each of you do but on how important you are to the project so 50%/50%.
You should be talking with him, not us.
I'd advocate 50/50 unless it is really obvious that there is a big discrepancy.
Jason brings up a good point. Is he going to take on other tasks and act like a founder, or is he just going to do UI/design and that is all?