So you’re founding a startup with some co-founders, and you already know (from Part 1) that you’re going to need to dole out the pie over time by vesting the founders’ stock. However, you still haven’t figured out just how much of the pie each founder will be receiving. This is a very important part of the process and shouldn’t be decided without careful consideration.
What are some of the factors that you could use to allocate ownership among the founders?
Past Contribution
Who has done what to get the project to this point? What is that worth?Future Contribution
Who will be responsible for the greatest growth and success of the business in the future? What is that worth?Opportunity Cost
What are team members giving up in order to participate in the venture? What is that worth?Relationships
I’ve never been a believer in Michael Corleone’s “It’s not personal, it’s business” philosophy. Businesses are run by persons. It’s always personal. Relationships matter. Make sure that the allocation of ownership is conducive to maintaining good relationships between the founders.There are no easy answers to these questions. The conversations can be VERY awkward. Get over it. Talk it out. Make decisions and put it to bed so you can get to work and build your business.
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