First, I understand this question has been asked several times but I believe this case is a little bit different.
Myself and a group of people recently competed in a Startup Weekend event (54 business competition, for those that are not familiar). We did not win, but have decided to move forward with our idea. We have a team of 6, but only myself and another person will make this our full-time priority. I'm coming from a sales background with experience in front-end and am currently learning the backend. The other full-time person is a marketing/business/public speaker type. We have 4 other team members that consist of:
All of which decided they want to play an 'advisor' role and are insisting on splitting the company equally. Their argument is 1) They can't calculate the value of their time already spent 2) Their hourly rate is higher compared to ours 3) They want controlling shares in case we decide to do something crazy.
We plan on raising ~100k in funding, which the marketing/business growth person will assist in. At that time, myself and the other full-time person will start to receive a salary. The salary will be minimal compared to what I'm use to earning, which is absolutely fine.
I feel this is a great opportunity to jump into the entrepreneurial world and am very grateful for everyones input and work thus far. However, splitting the company equally just doesn't seem fair. What are your thoughts? How should I approach this issue with them?
Thank you in advance!
Six people splitting the company equally sounds quite unfair. There is a way to calculate this all out (I got tired of repeating my answer on here, so blogged about it).
To summarize, you have 'founder shares': for future contributions which vest over time (typically 4-10+ years depending on hours worked), and 'equivalent to cash' shares for labor contributed that you would normally pay cash for.
It sounds like the guy who owns the domain and design guy should get 'equivalent to cash' shares valued at whatever valuation you raise the 100K at. Figure out fair market value (what you would pay) for the design services and domain, and pay in shares to vest immediately.
The marketing/business growth guy should absolutely get founder shares. Use the foundrs.com calculator to figure out the split between the three of you ... and note the difference in vesting. It will be 4 year vesting for you guys, 10+ years vesting for him depending on how many hours he spends per week on the company. It sounds like you want to encourage him to come in fulltime ASAP, and this will give a structure to encourage him. As for the lawyer, figure out which bucket he falls into.
As for their three arguments:
From my experience by participating in a winning Team of a Startup Weekend Program I must say that it is essential that all 6-team members can get along within a reasonable degree of conflict. First comes the team and then the validity of a given idea. Startup Accelerators and investors alike put greater importance of the profile of the founders than on the idea itself. Assuming that all 6-memebers can get along and can contribute significantly to the project, then it is vital to evaluate each member contribution in working time cost. Inevitably, that means you can not have equal share in the company.
In regards, to the 4-memmbers that want an advisor role:
If you do decide to have the other 4-members as advisors I recommend you to read the following article from techcrunch http://techcrunch.com/2011/09/22/free-startup-docs-how-much-equity-should-advisors-get/. It provides some guidelines and links you will find useful in order to negotiate.