Fair equity split be in this situation?


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I have been working on my startup for the last few months, where the idea and market research has been done by me, few months before. I have a working demo I developed with freelancers based on my technical design, the product is development and it's in his pre UI/UX stage. I already put 3K into it. I meet my future co-founder. He is a lawyer and an MBA graduate. He wanted 50/50. I said, 60/40 as the best proposition I think it's fair. What do you think? We have good chemistry (before the split discussion...), He is enthusiastic about the plan and I know that he can help me, even on the paper based on his credentials, to get funded (I think). Do you think I am right? I have brought my product development to more the half way…

Equity

asked Dec 26 '11 at 19:15
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Yishay Saban
1 point

3 Answers


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Firstly, it's worth remembering that 10% of nothing, is, well, nothing.

Secondly, Can you launch this business without him? Do you want to launch your business without him? Will 10% make a difference either way if the business is a huge success?

With all that said, you might want to read (and perhaps send your friend)Dharmesh Shah's post on equity split: http://onstartups.com/tabid/3339/bid/146/Startup-Founders-Should-You-Divide-Equity-Equally.aspx And of course, it should go without saying, that i fyou can't resolve this, you probably shouldn't work together!

answered Jan 26 '12 at 08:23
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Nick Stevens
4,436 points

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I think you are being very fair with this since you have done quite a lot and he had not done anything, your contribution needs to be respected. If he can't see it that way, let him make an argument about why the value be brings makes up for what you have already done.

Having this discussion with him is a really good opportunity to test your potential partnership before you commit. If it's very difficult to resolve this with him, then you might want to consider moving on, as you will come to many difficult issues you have to deal with in having a partner and it's important you have someone you can work with and be reasonable in times of conflict of contention.

answered Dec 27 '11 at 07:24
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Francis Upton
131 points

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It's not about NOW, it's about LATER.

What value is he going to add to the company, how much will his participation increase your chances of future success? Does he double your chance of success? If yes, give him 50%. If not, give him less.

Personally, I think that arguing over 10% is probably not worth the effort. You might want to do 51/49, just to eliminate any potential dead-lock situations.

answered Feb 25 '12 at 12:58
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Brian Karas
3,407 points

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