Splitting the Pie • by Jeff Benrey

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Getting Your Startup Started: Who Gets What

Getting Your Startup Started: Who Gets What

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  • 1. Splitting the Pie
    Jeff Benrey
  • 2. The Pie Can Shrink, the Pie Can Grow
    Time zero
    Founders 100%
  • 3. Always Focus on Growing the Pie
    Focus on the right product for a big market
    Manage your EQUITY and CASH wisely
    Assemble the right founders and the best team, do not settle to fill an empty seat
    If you need funding, pick the right investors, the right time and the right amount
    Execute, Execute, Execute
  • 4. Founders Checklist
    Keep number of founders to a minimum
    2 is ideal – typically one technical, one business
    At least one founder should be business focused.
    If one founder – then she should be strong both technically and business wise
    Each founder should add significant and on-going value to the company.
    Each founder should have a clear responsibility pre and post funding
  • 5. Founders Equity
    Split 50/50 ?
    Easiest answer and if founders are truly equal in their contribution from beginning to end, then it’s the right answer
    Almost always not the right answer
  • 6. Founders Equity
    Split based on value added and responsibility
    It’s the right answer – but involves hard conversations
    Come up with a list of key criteria
    Assign weights to each criteria
    Evaluate each founder based on these criteria/weights
    Determine % ownership for each founder
  • 7. Founders – Sample Pie Splitter
    Founder 1 – 59%
    Founder 2 – 41%
  • 8. Employee Options
    Everything being equal…
    Employees with more responsibility get more
    Star employees get more
    Early employees get more
    To manage cash, offer to trade more options for less salary
    Calculate a reasonable employee pool of options for each round of funding based on each level/job function
  • 9. Employees – Sample Option Allocation
    For each round of funding, list all types of positions, number of hires by round, then add up to compute option pool needed
  • 10. SUMMARY
    Keep it fair – Assume salary and options will be posted in the lunch room
    Focus on the building and growing your business at all times and don’t get hung up on equity, fund raising etc.