Start-up team organization, shares and duties. Advice needed
We are a group of 5 people working on an idea for a start-up. The aim is to find an investor that would allow us to develop the project fully. Now we're just at the idea and presentation stage.
3 of us are the "idea" people, the ones that had the idea to start with. These 3 people have very similar skills, sales and marketing. They brought in 2 other people: a lawyer and a technical/design person. This is a web start-up project that could be very big in terms of organization, building, launching and development.
We are trying to figure out how to split equity and duties.
A few questions:
- Would it be a good idea to split equally between the 5 people, considering that if an investor comes in he will probably end up with the majority of shares?
- Is it possible that 3 of the founders have similar skills?
- Is it possible that a founder gives the idea, takes his shares, but then don't actually work on the project hands-on?
Any advice on what would be the best way to organize this start-up and what is the best solution to present the team to an investor?
Thank you for your help.
Equity Founders Organization Presentation
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a 1 to 4 ratio of developers to others seems like it is going to be problematic. That is A LOT of overhead for only one person to produce for. – Tim J 13 years ago
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we actually have NO developers. we are hoping to get someone (employee) if we get fundings. Do you think it's 100% necessary to start building something before presenting to VC or incubators? – Giovanni 13 years ago
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No, but your chances of getting interest are about 0. I also think that investors will not really be impressed with the fact that there are five "founders" - none of whom are technical. – Tim J 13 years ago
1 Answer
As the resident expert on equity split, I'll try to give you some pointers...
You are already 5 people, and 4 are not producing anything: you only have one developer.
Splitting equally among 5 people is a very bad idea. Who is the main driver for the project? Don't say that all 4 or 5 people are equally passionate about building this product.
And by the way, an investor will not get the majority of the shares, at least not in the first round of investment. They'd typically get from 20% to 45% of the company.
My main advice: stop presenting your idea and start implementing it. That means both actually coding, and finding the first users or customers.
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thanks for the answer. let me add a couple of points to explain better. we actually have NO developers involved. the technical/design responsabilities (mine) are just on a project management and resources organization basis for what concerns development (coding). Whilst for design I will be doing it all. The other thing is, if a VC invests and requires 30%, that means 70% divided by 5 is 14% each, meaning the VC will have majority. Please let me know if I'm getting something wrong, I'm no expert at all. – Giovanni 13 years ago
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Ok, so all talking not doing and a vc is supposed to buy into that - hard hard hard. Get someone on board who implements. Prototype, alpha, whoever you want to call it. – Net Tecture 13 years ago
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Say we're going to build the prototype for presenting the project to VCs, what do you think of the number of founders and the split issue? – Giovanni 13 years ago
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I think you are overly optimistic about any VC caring until you stop talking and start doing. Out of 5 people, not one will code. So where is the product? Solve that problem first. – Alain Raynaud 13 years ago
