Slicing Pie Event Tonight – How To Split Startup Equity Between Founders

Guest Post by Mike Moyer:  Mike is the inventor of the Slicing Pie model, a universal method for creating a perfect equity split in a bootstrapped startup company.  Mike is an author and entrepreneur who started a number of companies including Bananagraphics,  Moondog, Vicarious Communication and Cappex.com, a site that helps students find the right college. 

Today he runs Lake Shark Ventures, LLC, an early-stage and growth-stage consulting and investment firm and teaches entrepreneurship at Northwestern University and the University Of Chicago Booth School Of Business. He has written eight books with a focus on business and entrepreneurship.

Mike and Founder Institute are running a workshop tonight: Thursday 25th June – Meet at 6.00pm for a 6:30pm sharp start. 8.30pm close.

Where? Proudly hosted by Deloitte Sydney – Level 9, 225 George Street

IMPORTANT: You must bring a Laptop and Pen/Paper to participate in the Slicing Pie Grunt Fund workshop exercises

Tickets are normally $40, and I’ve set up a discount code to make it $30 with code STARTUP88. (This is the same price of the ebook which is included in the ticket price.) Book your tickets here 

How to Split Startup Equity

You and a partner go in “50/50” on a new business. You do all the work, they own half the company.

What follows is a series of buyout negotiation and fights that will likely cause the company to fail. This all-to-common occurrence is due to the nature of most equity splits.

They are known as fixed-splits and they are both unfair and inflexible.  Fixed splits are created when founders dole out equity at the outset of the venture in anticipation of future contributions.

Because the allocations are made in advance of work being done, the model isn’t fair if the work actually done doesn’t match the original expectations.

When this occurs, the founder’s must renegotiate their holdings.

Now what?

Slicing Pie outlines a simple method for dividing equity in an early stage company that tells you exactly the right number of shares for each participant.

All other methods of dividing up equity create problems- all of them. Slicing Pie gives you a way to acquire the things you need to build your business without cash.

However, many people are discovering the benefits of a dynamic equity split which allocates equity over time based on the actual contributions from individuals. A well-organized dynamic split allows entrepreneurs to calculate exactly the right number of shares each participant deserves.

Using a dynamic split program shares are calculated using a function of the fair market value of the inputs and risk. Inputs can include time, ideas, seed funding, equipment, supplies and anything else that a person can contribute to a growing business.

At any moment the individual’s ownership is determined by dividing the value of the individual’s contributions by the total contributions of all participants.

This provides a very accurate calculation of the individual’s contribution relative to the contributions of others. Using this method, for example, the person who makes 20% of the contributions to a company should receive 20% of the equity.

The model changes over time to keep it fair.

“When someone invests time or money into a startup company they are taking risk,” says Mike Moyer, inventor of a dynamic split model called Slicing Pie, “the amount of that risk is equal to the fair market value of the contribution. This provides the basis for a perfectly fair equity calculation.”

Dynamic models are growing in popularity among early-stage companies that may be strapped for cash. Using the dynamic model, equity becomes a flexible currency that can be used to acquire the things company’s need to succeed.

When fixed models are used, founders run the risk of making costly mistakes that are difficult, if not impossible, to undo later on.  “Nothing beats cash when starting a company,” said Moyer, “but, when you don’t have cash equity is the next best thing as long as you are fair to everyone involved.”

Workshop

Attendees to the Slicing Pie workshop will learn how to implement a dynamic equity split in their own company. The model includes two parts.

The Allocation Framework that tells managers how much equity each person deserves. And, the Recovery Framework which determines the fair buyout price (if any) when people separate from the company.

The workshop will cover frameworks as well as basic legal and investment issues companies face.

Additionally, an interactive Slicing Pie game simulates a startup company’s evolution and helps people apply the model and see how it compares to traditional methods.

This is the perfect seminar for anyone who wants to start their own company and struggles with early-stage equity negotiations.

Thursday 25th June – Meet at 6.00pm for a 6:30pm sharp start. 8.30pm close.

Where? Proudly hosted by Deloitte Sydney – Level 9, 225 George Street

IMPORTANT: You must bring a Laptop and Pen/Paper to participate in the Slicing Pie Grunt Fund workshop exercises

Tickets are normally $40, and I’ve set up a discount code to make it $30 with code STARTUP88. (This is the same price of the ebook which is included in the ticket price.) Book your tickets here