Learn how to create a perfect equity splits for early stage companies. Contrary to popular belief, there is a way to determine exactly how much equity each person in your company deserves. Based on the book, Slicing Pie (SlicingPie.com), by Mike Moyer (mikemoyer.com)

1. EUREKA!
@GruntFunds
www.SlicingPie.com/feedback
Slicing Pie

2. Why?

3. Fun along the way
BIG
PAYOUT
HARD
WORK

4. Fun along the way
?HARD
WORK

5. Success Criteria
1. Lots of money
2. I get my fair share

6. Fair
=
Fun

7. Your Share % =
The Value of Your Contribution
The Total Value
Perfectly Fair Equity Calculation:

8. Fixed
Equity
Split
67% split equity at the outset of the venture
* Wasserman/Hellman

9. “50/50”
“33.3/33.3/33.3”
“25/25/25/25”
90%+ of startups do equal splits

10. “60/40”
“51/49”
“25/30/45”

11. You do all the work?
You bring in another guy?
Your partner wants to quit?
1,000,000 other things?
But, what if…
You want to quit?
Your CTO gets hit by a bus?

12. Your Share % >
The Value of Your Contribution
The Total Value
Your Share % <
The Value of Your Contribution
The Total Value

13. Alligator Pit

14. Not Fair
=
Not Fun

15. What We Need
• Perfectly fair
• Rewards contributions
• Provides motivation
• Accommodates team changes
• Flexible in the face of rapid change
• Gets rid of the gators!

16. Dynamic
Equity
Split

17. You Contribute 50% = You Get 50%
You Contribute 10% = You Get 10%
You Contribute 23.2% = You Get 23.2%
No more and no less

18. Fair
=
Fun

19. The Grunt Fund
1.Allocation Framework
2.Recovery Framework

20. Allocation Framework
1. Convert contributions to Slices
2.
3. Allow it to self adjust over time (dynamic)
Your Share % =
Your Slices
Total Slices

21. Risk vs. Return
aka Making Bets

22. Convert to Slices
Non Cash Cash

23. Fair
Market
Value

24. Convert to Slices
Non Cash Cash
FAIR
MARKET
VALUE
FAIR
MARKET
VALUE

25. Convert to Slices
Non Cash Cash
FAIR
MARKET
VALUE
x2
FAIR
MARKET
VALUE
x4

26. Time
Fair Market Salary
-
Cash Compensation
X
2
÷
2,000
=
Grunt Hourly Resource Rate (GHRR!)

27. Time
$100,000
-
$25,000 ($75,000 at risk)
X
Two ($150,000)
÷
2,000
=
Grunt Hourly Resource Rate (GHRR!)
75 slices/hr

28. Small Money
Cash Amount
X
4
(Investments Convert When Spent)

29. Equipment
• New = Purchase price x 4 (cash)
• Less than a year old = Purchase price x 2 (non-
cash)
• Older than a year = Book value x 2 (non-cash)

30. Everything Can Convert
• Unpaid Commission x 2
• Unpaid Royalty x 2
• Unreimbursed Expense x 4

31. Grunt Funds in Action

32. Grunts Contribute Different Things
Grunt 2Grunt 1
Grunt 3
Jr. Developer Founder Rich Uncle

33. Convert to Slices
Grunt 2Grunt 1
Grunt 3
Jr. Developer Founder Rich Uncle

34. Add ‘Em Up!

35. Grunt 1’s Share
÷

36. Grunt 2’s Share
÷

37. Grunt 3’s Share
÷

39. Sales Guy
Grunt 4

40. Sales Guy
Grunt 4

43. Grunt 1’s Share*
÷
*If the Grunt Does Nothing Else

44. Grunt 2’s Share*
÷
*If the Grunt Does Nothing Else

45. Grunt 3’s Share*
÷
*If the Grunt Does Nothing Else

46. Grunt 4’s Share
÷

48. Recovery Framework

49. Recovery Framework

50. Recovery
• No pie for non-cash
• No multiplier for cash or
tangible property
• Buy back if possible
• Non-compete
• Loyal employee
protection

51. Removing a Grunt
• Keeps pie
• Buyback at proxy value
= $
• No non-compete

52. Grunt 4
Convert to Slices
Grunt 2Grunt 1
Grunt 3
Jr. Developer Founder Rich Uncle

53. Grunt 4
Convert to Slices
Grunt 2Grunt 1
Grunt 3
Jr. Developer Founder Rich Uncle

54. Removing Contributions

55. Grunt 2’s Share
÷

56. Grunt 3’s Share
÷

57. Grunt 4’s Share
÷

59. Freezing the Pie

60. Freezing the Pie

61. Freezing the Pie
• When you can just pay people!
– Revenues
– Series A investment

62. Time
$100,000
-
$0 ($100,000 at risk)
X
Two ($200,000)
÷
2,000
=
Grunt Hourly Resource Rate (GHRR!)
100 slices/hr

63. Time
$100,000
-
$25,000 ($75,000 at risk)
X
Two ($150,000)
÷
2,000
=
Grunt Hourly Resource Rate (GHRR!)
75 slices/hr

64. Time
$100,000
-
$50,000 ($50,000 at risk)
X
Two ($100,000)
÷
2,000
=
Grunt Hourly Resource Rate (GHRR!)
50 slices/hr

65. Time
$100,000
-
$75,000 ($25,000 at risk)
X
Two ($50,000)
÷
2,000
=
Grunt Hourly Resource Rate (GHRR!)
25 slices/hr

66. Time
$100,000
-
$100,000 ($0 at risk)
X
Two ($0)
÷
2,000
=
Grunt Hourly Resource Rate (GHRR!)
0 slices/hr

67. Freezing the Pie

68. Freezing the Pie
Profits or
Proceeds

69. Series A Investor
Negotiate $900,000 Pre Money
Raise $1,000,000

70. Series A Investor
$1,000,000 + $900,000 = $1,900,000

71. Series A Investor
$1,900,000 Post-Money

72. Freezing the Pie- Series A
Profits or
Proceeds

73. What We Got
• Perfectly fair
• Rewards contributions
• Provides motivation
• Accommodates team changes
• Flexible in the face of rapid change
• Gets rid of the gators!

74. Cheat Sheet

75. Resources

78. A La Mode at SlicingPie.com
• Lawyers
• Agreement templates
• Videos
• Articles

79. Other Books by Mike

80. EUREKA!
Download the Slides:
www.SlicingPie.com/feedback
Slicing Pie
mike@slicingpie.com