No one would argue that fair equity split among founders boosts startup performance, but the problem here is that fair doesn't always mean equal. Actually, equal splitting can be harmful for startups. Research has shown that equal splitting in startups is associated with:
Lower pre-money company valuations
Less stable startup performance.
It is so much easier to split shares equally and avoid uncomfortable conversations. Yet this may send an indirect signal to potential investors that your team is homogenous (all founders have similar background and experience) and that the founders lack entrepreneurial negotiation skills.
Our solution is focused on counting in all possible contributions of the founders to the project and suggesting a split arrangement which can serve as a starting point for further well-grounded negotiations.
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How to divide equity among founders - an online solution
1. How to divide equity among
founders
Easy-to-use online solution
July 2013
2. There is a problem
A Harvard professor Noam Wasserman has
been researching the problem of equity split
among founders for many years
He discovered that equal splitting is associated
with:
Lower pre-money company valuationsLower pre-money company valuations
Less stable startup performance
WHY ?
3. Because
Teams may tend to avoid tough equity negotiations…
… and quickly jump to equal splitting
By doing this they may fail to:By doing this they may fail to:
Understand in detail strengths and contributions of their
members
Predict and mitigate future conflicts
Demonstrate the lack of entrepreneurial negotiation skills
4. Our solution
We provide founders with an easy-to-use
automated online solution for well-grounded,
deliberate and fair decisions on equity split
Which can be used:
To count in every possible contribution each of the
founders has to bring to the tablefounders has to bring to the table
To calculate a fair share of each founder in startup
equity
To help reduce negotiation frictions
To provide a starting point for meaningful
and trusting negotiations among founders
5. It’s easy as 1-2-3..
Step 1
Founders are asked simple, but detailed
questions
Step 2
Based on their answers our built-in
algorithm estimates their relativealgorithm estimates their relative
contribution to the venture
Step 3
Based on the estimations our system
suggests the most fair way to split
equity among the founders
6. Monetization
Monetization of traffic and audience:
aggregation and advertizing of service
providers for startups
paid services for advanced users who
want to explore our expertise in equitywant to explore our expertise in equity
incentive plans (e.g. an automated
constructor of employee stock
option plans)