Equity/Profit share split for small projects with unknown levels of contribution
Alright, I have a pretty clear understanding of how to split equity for real startups, but how to do it for a smaller project (an app), with little acquisition potential (just profits), and a team that isn't sure how much it will contribute?
Background: I went to my local startup weekend, and we won 1st place with an iOS game. We want to put it in the store, make some money, streamline the in-app purchases and milk it for what we can. There were 8 people involved at the event, we are down to 3 that want to be semi-serious about it, and 2 more that want to pitch in a little.
I have a successful startup under my belt, I'm also the programmer, and the de-facto project leader (recruited the team, tend to lead in meetings, etc). The other two partners are a designer and an illustrator. The 2 smaller contributers are a programmer and a social media / marketing person.
I am independent right now, and I want to put in a significant amount of time (10-30 hours a week) to get this thing out. One designer wants to put in around 20 hours as well, the illustrator would have to work weekends. I haven't worked with the illustrator as much, so I don't know if it'll be a great fit yet (early indicators are good).
What is the best way to split the equity or profit share in this case? I'd LOVE to have a way that naturally takes into account how much people END UP contributing, because people will change their minds. Any clever ideas?
We also don't know where it'll go. Maybe it'll make money and some of us will want to take it bigger, maybe we'll just do it for 6 months.
2 Answers
I like this calculator. Foundrs.com I think it does a short and simple factor of the major contribution points in a small tech startup. It puts a lot of weight on the lead developer, the most critical portion of a tech startup. That person (you in this case) typically ends up managing new hires (developers) and making other critical business decisions around the application.
It's something everyone can fill out and participate in and visually see what is critical to the company.
Start up weekends are tough, there are typically a couple critical people on a team and 50% or more are unnecessary. It's kind of awkward to tell them that and decrease their potential equity due to their low impact on the project - but this calculator can help.
Also, if someone doesn't have a function or isn't the lead product visionary don't let them say "I'll be CEO" ... like it's middle school and everyone needs to have a role. the best tech start ups have a lead product visionary who also steers the ship. Facebook, Tumblr, Google (when they were young and again now)... any major hit.
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Cool, thanks. Is there anything you would change to account for the fact that is just an app, and we would like some of our less productive members to be able to stay involved without feeling demotivated? There's little to no dead weight on the team (reason we won). – Sean Clark Hess 11 years ago
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Just keep an effective list of to dos :) - fill up trello.com with a bunch of cards and have members sign up for things they are capable of doing and get to work. – Ryan Doom 11 years ago
I'd LOVE to have a way that naturally takes into account how muchHere's an approach that meets your need that Mike Moyer came up with - a grunt fund calculator:
people END UP contributing, because people will change their minds.
Any clever ideas?
http://www.slicingpie.com/the-grunt-fund-calculator/ His book Slicing Pie has had good reviews & describes a few different scenarios that are applicable. I personally liked the book and found it a good read.
