Comments on: Dividing equity between founders

By: 16 Must-Read Articles For Tech Entrepreneurs | Alltopstartups

16 Must-Read Articles For Tech Entrepreneurs | Alltopstartups — Thu, 20 Oct 2011 14:30:19 +0000

[...] Dividing Equity Between Founders – By Chris Dixon [...]

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payday loan — Sat, 04 Jun 2011 23:58:00 +0000

All too often we see founding teams decide to divide the pie up
evenly when they start. When we ask them why, they often admit they did
not want to create a conflict and decided it would be easier to share
equally. While there are certainly examples of successful companies … Yes, every situation is unique in some ways, but usually not so unique that you can justify an equal equity split between the CEO and VP Marketing, even if they are both founders. …

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By: Starting Your First Company? What to Read When You Don’t Know What You Don’t Know : melanie.io

Thu, 03 Mar 2011 05:15:31 +0000

[...] read this and then [...]

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Treasure BOOKMARKS for Entrepreneur « ZEST..!! — Wed, 10 Nov 2010 01:39:47 +0000

[...] Dividing Equity Between Founders – By Chris Dixon [...]

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By: Joseph Turian

Joseph Turian — Wed, 02 Dec 2009 08:39:37 +0000

Why is it called a non-convertible loan if it is intended to convert into equity?

Question two:
If one were to hire a salesperson and offer them 10% commission, and were to offer them payment using the non-convertible loan strategy, would it offer the salesperson a perverse disincentive to keep the valuation low? Or is the valuation essentially proportional to the salesperson’s revenue? Would the salesperson benefit from pressuring the founders towards taking investment prematurely?

i.e. in what circumstances are the salesperson’s interests not aligned with the founders’?

I am curious to understand what does and does not align interests of people working for the company at an early stage.

By: New Enterprise Forum: Term Sheets | Ann Arbor Startup Blog

New Enterprise Forum: Term Sheets | Ann Arbor Startup Blog — Fri, 16 Oct 2009 02:51:30 +0000

[...] http://www.cdixon.org/?p=367 [...]

By: links for 2009-09-15 « Blarney Fellow

links for 2009-09-15 « Blarney Fellow — Wed, 16 Sep 2009 01:07:49 +0000

[...] cdixon.org / Dividing equity between founders (tags: startup) [...]

By: Dividing equity between founders | Igniting Startups - nPost

Dividing equity between founders | Igniting Startups - nPost — Mon, 31 Aug 2009 15:25:39 +0000

[...] From cdixon.org [...]

By: startupbug.com

startupbug.com — Fri, 28 Aug 2009 08:21:08 +0000

Dividing equity between founders…

Obviously the main consideration should be the relative importance of each founder to the future prospects of the venture. And, as in any negotiation, the alternatives each person has will also factor in….

By: Philip Baddeley

Philip Baddeley — Tue, 25 Aug 2009 22:32:59 +0000

Great posts. We came up with the Equity Splitter, see Equity Fingerprint website, to provide a tool to help founders split the equity. It is simple and perhaps does not take into account enough of future scenarios. So important to have good leaver/bad leaver provisions as you say. Your stress on looking to the future says it all. Thanks for great posts

By: Twitter Trackbacks for cdixon.org / Dividing equity between founders [cdixon.org] on Topsy.com

Mon, 24 Aug 2009 22:24:01 +0000

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By: Roger

Roger — Mon, 24 Aug 2009 16:35:50 +0000

Interesting article. I agree with most of the points mentioned in the article. The one point that seems unfair is to create a loan for the one founder that put in seed money. Loan’s are usually secured by hard assets and putting money in at a start-up is a high-risk, high-reward game. For a seed money at a 5% interest loan, it’s still very high risk but the reward is just not there. If I were the “no cash” co-founder, I would take that deal all day long.

By: Umair Mufti

Umair Mufti — Mon, 24 Aug 2009 03:32:56 +0000

i think himanshu meant: http://www.andrew.cmu.edu/user/fd0n/35%20Founders%27%20Pie%20Calculator.htm

By: himanshu baweja

himanshu baweja — Sun, 23 Aug 2009 17:19:17 +0000

The approach we guys used is the founder’s pie calculator by CMU prof.

http://www.andrew.cmu.edu/user/fd0n/35%20Founders'%20Pie%20Calculator.htm

Its a more a analytical approach and makes you think about all the different factors and their relative importance.

By: chris

chris — Sun, 23 Aug 2009 17:17:12 +0000

Aditya – I don’t see why location should be a determinant of the equity split. Perhaps it could be a determinant of cash salary, but that seems like all to me. If you create, say, 50% of the value in the company, you should get 50% of the equity.

Re having co-founders apart – If there is some strategic reason you need to (e.g. sales office in US, operations in India) it can make sense, but if that’s not the case I’d say it’s highly preferable to have everyone together in the same location.

By: Twitted by PhilipHotchkiss

Twitted by PhilipHotchkiss — Sun, 23 Aug 2009 16:23:37 +0000

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By: Aditya

Aditya — Sun, 23 Aug 2009 16:04:06 +0000

Chris,

Thanks for another great article!

You touched following points –
1. Future contributions
2. Past contributions
3. Past success stories

I was wondering what are your thoughts on risk profiles of co-founders when they are not located at same place? Say one is located in Silicon Valley and other is located in low cost development country. Since the lifestyles are different, should we consider this location factor?As their might be difference of 5x cost at both places.

Or on the side note, is it not a good idea to have a co-founder a distant apart?

Your thoughts will be appreciated!

Thanks,
Aditya

By: chris

chris — Sun, 23 Aug 2009 14:43:13 +0000

Well, to keep it super simple I just personally used a regular loan with the expectation everyone would be fine letting me convert it.

By: Louis Marascio

Louis Marascio — Sun, 23 Aug 2009 14:41:02 +0000

Chris, these are good guidelines. In your seed capital description (3rd to last paragraph), don’t you mean a convertible loan since that debt should convert to equity at a qualified financing? BTW, I’ve used this model and it works well.

Thanks,
Louis