Thanks for all the responses so far!

One other question is how to split equity when 2/3 founders wont be leaving
their day jobs. Only 1 founder will be putting in the sweat or grunt to
generate the revenue by booking meetings/pitching etc (aside from the
social/search/display generated leads).

How much should the remaining founders get? 1 of them is investing the
development resources to build the site, and the other will invest the
design resources.


On Thu, Apr 12, 2018 at 2:38 AM, Kevin Baum <kevin.b...@agriwebb.com> wrote:

> (Forgot to mention. Obviously same exception for those who bring IP or
> cash)
>
> On Thu, 12 Apr. 2018, 2:34 am Kevin Baum, <kevin.b...@agriwebb.com> wrote:
>
>> Fair enough. Just my personal opinion. A quick anecdote to contextualise
>> though:
>>
>>    - About 3 years ago an entrepreneur friend from Colorado started a
>>    business with 2 people from where he was working. They split equity 3 ways
>>    and worked on the side for over a year (past the cliff of their 
>> accelerated
>>    vesting).
>>    - One of the three of them barely contributed during that time,
>>    citing how his work projects were far more onerous than expected and he
>>    just didn't have time to help out, but would certainly quit his job like
>>    the other 2 once they raised their seed round and begin pulling his 
>> weight.
>>    - After a year, they raised that seed round. My friend and the second
>>    co-founder quit their jobs and began working full-time as planned.
>>    - 6 months later (18 months in), despite very little contribution,
>>    the third co-founder decided that he was quitting McKinsey to pursue a
>>    career in politics and would not be working on the startup. Having already
>>    vested half of his shares, he was now dead equity totalling 1/6 of the
>>    company and refused to sell back that equity.
>>    - It nearly killed the company, and lawyers had to get involved to
>>    sort it all out and it certainly ruined their friendship.
>>
>> Sadly this is not isolated either, as I know of a nearly identical (but
>> more easily resolved) situation with a former classmate.
>>
>> I guess I would suggest that granting sweat equity before it has been
>> earned can be problematic and that same thing can be accomplished by having
>> the equity held by the company as a pool or some other mechanism and not
>> granted until it has been truly earned.
>>
>> And while I firmly believe in the power of working on something part time
>> (perhaps I was too harsh before), I also feel that nearly every story of a
>> side gig turned successful startup has to involve a "moving from part-time
>> to full-time" stage.
>>
>> Cheers,
>>
>>
>> Sincerely,
>>
>> *Kevin Baum*
>>
>> [image: AgriWebb] <http://agriwebb.com/>
>>
>> Kevin Baum / CEO/Co-founder
>> Ph: 0449 606 144
>>
>> AgriWebb
>> http://agriwebb.com
>> Level 6, 227 Elizabeth Street, Sydney
>> <https://maps.google.com/?q=Level+6,+227+Elizabeth+Street,+Sydney&entry=gmail&source=g>
>> 2000
>>
>>
>> On Wed, Apr 11, 2018 at 11:05 PM, Dean Collins <d...@cognation.net>
>> wrote:
>>
>>> Pretty good advice apart from quitting your job part.
>>> But agree with everything else.
>>>
>>> Cheers
>>> Dean
>>>
>>>
>>> -----Original Message-----
>>> *From:* Kevin Baum [kevin.b...@agriwebb.com]
>>> *Received:* Wednesday, 11 Apr 2018, 8:04AM
>>> *To:* silicon-beach-australia@googlegroups.com [silicon-beach-australia@
>>> googlegroups.com]
>>> *Subject:* Re: [SiliconBeach] Startup equity split
>>>
>>> Hi Luke,
>>>
>>> Co-Founder of a 4 year old SaaS company here.
>>>
>>> Having had multiple experiences with Equity that led to conflict I would
>>> recommend the following:
>>>
>>>    - *Always split equity evenly between founders* (unless one is
>>>    bringing * defensible IP* or *$$* to the table. Ideas do not count.
>>>    It's not about ideas, but execution). Roles change and become more and 
>>> less
>>>    important over time. Splitting it based on perceived value in the future 
>>> is
>>>    impossible to do.
>>>    - *Everyone Vests* - Typically 4 yr with a 1 yr cliff. I personally
>>>    have dealt with and know several others who have dealt with founders
>>>    leaving early and having dead-equity nightmares that decimated funding
>>>    rounds.
>>>    - *Nobody gets equity granted until they quit their job* - people's
>>>    circumstances change and you should not grant equity based on a promise.
>>>    Part time is 1/10th as effective as full, and sweat equity should not be
>>>    realised until someone goes full time.
>>>
>>> Happy to chat more about some of my horror stories if you like.
>>>
>>> Sincerely,
>>>
>>> *Kevin Baum*
>>>
>>> [image: AgriWebb] <http://agriwebb.com/>
>>>
>>> Kevin Baum / CEO/Co-founder
>>> Ph: 0449 606 144
>>>
>>> AgriWebb
>>> http://agriwebb.com
>>> Level 6, 227 Elizabeth Street, Sydney
>>> <https://maps.google.com/?q=Level+6,+227+Elizabeth+Street,+Sydney&entry=gmail&source=g>
>>> 2000
>>>
>>>
>>> On Fri, Apr 6, 2018 at 4:56 PM, Luke Haddrick <luke.haddr...@gmail.com>
>>> wrote:
>>>
>>>> Hey Guys
>>>>
>>>>
>>>> I am in the early stages of setting up a SaaS company with 2 other
>>>> partners. The dilemma I face is all too common, what should the split be?
>>>> We haven't started selling the product yet, however we need to address this
>>>> upfront now as you know.
>>>>
>>>> Summary of the role of the 3 founders and the level of involvement:
>>>>
>>>> Founder 1: CEO - owner of the idea, and will be responsible for
>>>> day-to-day, pitching, bus-dev etc
>>>>
>>>> Founder 2: Tech Director (CTO) who will manage the development
>>>> requirements (time is scarce as working FT elsewhere)
>>>>
>>>> Founder 3: Director - who will bring the network of contacts and has
>>>> founded another creative agency (time is scarce as working on multiple
>>>> other projects)
>>>>
>>>> Question 1: Should costs for development and design of the website be
>>>> split even through the other two partners are taking a chunk of equity
>>>> each? As opposed to startup expenses being invested by each party i.e.
>>>> development costs / design costs to be earn their equity stake.
>>>>
>>>> Question 2. With respect to sweat involvement or grunt a flexible
>>>> structure is needed where the amount vested can be adjusted over time.
>>>>
>>>> How do I approach this?
>>>>
>>>> Thanks
>>>> Luke
>>>>
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-- 
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