Here is the situation. I'm working with two other folk on our startup and we are now planning to incorporate. We're trying to figure out how to allocate founder equity between ourselves.
So far, we have been keeping track of hours spent and the total is as follows:
Person A: 800hrs
Person B: 500hrs
Person C: 300hrs
No one has invested any money so far.
A is working fulltime on the startup and B & C are part time, but promise to become fulltime in Dec 2010 (because of commitments to their existing job)
Our current thinking is that we want all three founders to have the same equity ( B & C will buy hours @ $50/hr) to equal A's 800 hrs.
The issue is how do we vest the founder stock going forward since B & C are not fulltime until Dec and may end up never going fulltime. Similarly A is fulltime now, but may have to go part time if no revenue comes in soon?
We want to incorporate and do the IP assignment asap which is why we are trying to figure out the equity split for the incorporation.
In general, how do you vest founder stock if the founders are not fulltime, but you can only pay them in equity?
Co-Founder Founder Founders Fulltime
I can see several approaches:
Let me assume that person A is the CEO. Start with 50% for A. Then, do persons B and C hold essentially similar/equally important roles? Then do 25% each.
Did you incorporate yet? If not, I recommend you check out my pre-incorporation co-founder agreement. You don't want to have people contributing IP with no paperwork at all.
Yours is a fairly common situation. My suggestion would be to deal with contribution prior to incorporation and set up a separate arrangement for the time period post-incorporation to full-time participation by the other two. For example, you could:
The good news is that just about anything that you can agree with your partners is an option.
If you do anything other than 1/3 each then the part timers have even less incentive to jump to full-time later on. I am not saying you have to do it - it is just a consideration.
You can certainly come up with other means of repaying the differences in productivity.