Equity Splitting for Startups


Published on

Many businesses only address equity splits when it's too late. This ends up becoming a financial and emotional drain on the business and the people in it.

This presentation addresses the following actionable results:
+ How to identify the fair way to split your business.
+ How to prevent future financial and legal disagreements.
+ Ways to maintain strong relationships between all the owners.

The video version is here:

Disclaimer: This is not financial advice. It is general and educational. I have not given any consideration to your specific industry, business model or financial circumstance.

Equity Splitting for Startups

  1. 1. Commercial in Confidence. © 2014 Saasu Pty Ltd. All Rights Reserved. ! 19th March 2014 ! BY Marc Lehmann CEO, Saasu ceo@saasu.com @saasu @marclehmann CEO INSIGHTS Equity Splitting
  2. 2. About me
  3. 3. Disclaimer General and Educational. ! These are take away ideas only, not advice. Your financial planner & accountant are your advisors for your specific circumstances.
  4. 4. Methodology This is just one of many methods. Different businesses suit different models. ! This is to help you clear blind-spots, seed ideas & inspire. It also serves to break what is often a back of napkin approach by entrepreneurs at the critical start point.
  5. 5. What’s the experience of equity splitting? Unfair Incomplete Unstructured Legal paperwork Changed contributions Unaccounted contributions
  6. 6. Default elements in equity splitting? IDEAS 💡 CASH 💵 TIME ⏲
  7. 7. Business equity is often split on a napkin !!!
  8. 8. Where do we start? A: Logic, then some maths
  9. 9. Value execution and focus skills
  10. 10. The officer at risk
  11. 11. Present value your future time and cash flows
  12. 12. Foregone salary opportunity cost
  13. 13. Benchmark your ideas to competitors IP value
  14. 14. Relationship & health pre-conditions
  15. 15. Personal brand wash applied to the business
  16. 16. Agree probability of cashflows
  17. 17. Value experience and youth
  18. 18. Starting point CAPITAL 💵 IDEAS 💡 BRAND RISK ⚠ COSTS
  19. 19. Step 1: Break each component down
  20. 20. Step 2: Total of all the components
  21. 21. Step 3: Split the equity
  22. 22. CAPITAL 💵 Equity Splitting
 Smarties Guide by Marc Lehmann Initial capital Personal
 Guarantees 💵 ☂ Future capital - Opportunity
 costs Initial time invested⏲ BRAND RISK ⚠ COSTS 📰 Well known board members Ideas Generated © Intellectual
 Property 🎯 Strategic Plans ✒ Founder Brand Wash Pre-existing Visual Identity Contact Networks 💍 Relationship Complexity 🚪 Doors already Opened 💰 🏦 ⌖ Bank/debt Guarantee Director Liquidity Provider Company
 Secretary Public
 Officer Assets transfers Free
 resources Vehicle usage Office setup 🚘 Devices Travel 📒 🏢 ⚛ ✈ Digital
 Assets🔗 Company Formation Top 10 Tips 1. Value execution and focus skills. 2. Riskier roles are worth more equity. 3. Present value your cash valuations. 4. Foregone salary is an opportunity cost. 5. Model probability of valuation items. 6. Benchmark value IP/Ideas to competitors. 7. Any investor relationship or health issues? 8. Strong personal brands add value. 9. Future cash flow has risk, allow and agree on it. 10.Experience doesn’t always trump the value of youth. Mentors & advisors Saasu Pty Limited ACN 093 453 886 http://creativecommons.org/licenses/by/4.0/ 80% 20% Capital IP Brand Risk Costs 50 150 150 200 100 75 275 PP Patents pending TM Trade marks IDEAS 💡 VALUE & SUM COMPONENTS (provided by each founder)