Toughest Exercise: Equity Split


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Possible Duplicate: Is performance based equity vesting possible? Forming a new software startup, how do I allocate ownership fairly?

The venture was started by "A" and "B".
"A" worked full time, while "B" supported by refining the idea through discussions and making some investment. "B" was also a moral supporter. "A" also invests money and it is double the amount "B" invested.

"A" worked for 4 months day and night and built a Beta ready product. At that time "C" joins full time. "C" starts sales and marketing and acquires some paid customers. There is one more person, D, whose contribution is somewhat like "B", but in lesser proportion.
Business model is proven in 6 months. "A" and "C" are working full time and it's time to raise money from investors. "B" & "D" are still working with their employer. "A" has been financed by "wife" so that "A" can continue. "C" has been financed by the investment from "A" and "B". "C" does not have an education as good as "A", "B" and "D", and hence has been removed from the co-founder list for applying to the angels.
"B" and "D" decides to join this full time only when they get investment and decides to take 50% lesser salary than their current salary. Everyone will get same salary when investor invests.

Now, what equity, "A", "B", "C" and "D" should get get ? Should wife of "A" get any equity ?

Co-Founder Equity

asked Nov 21 '12 at 06:27
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User13405
101 points
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  • This is just too ridiculous to answer. Did A and B have an equity split agreement when they started? What kind of agreement was made with C when he came on? Why don't you start by asking A, B, C and D what equity they were expecting? I don't think it will be possible for anyone to give a right answer to this - it is more of an example of why these things should be decided in advance. – Rob Gordon 12 years ago
  • As usual, referring to Joel Spolsky's answer here: http://www.brightjourney.com/q/forming-new-software-startup-allocate-ownership-fairlyEdralph 12 years ago

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Co-Founder Equity