Fairest way to split benefit of Bootstrapped projects
Today is the day to share with you what I found as the best model to share benefit of bootstrapped project and ensure that the friends I am starting a business with would remain my friends.
I had this question in my heart for a long time and one day I saw a post in my LinkedIn by chance about the fairest way to split startup equity. I read it and I found it as an answer for my question.
Slicing Pie Model! Yeah, it is name of the model. Mike Moyer created this model in 2010. In his model fair market value of the actual contributions will be converted into time value. All these time values will be considered as a big pie. And each one will have different slice of the pie according to his/her contribution.
Different possible contributions has different multiplier. Time, money, intellectual property, relationship are all possible contributions.
It will consider payment per hour for each-one according to their actual market value. Its multiplier is 2 because of the risk they are taking for their contributions. In fact their possible payments is two times of their payment in actual market. The money contribution multiplier is 4, because less people have money and it is more valuable than time.
There is also fair rule for the one who leaves the team. If you leave the team with accepted reason you wont loose your equity. But if you leave the team with unaccepted reason you will loose all your equity from time contributions but for money contribution it will be different and you wont loose your invested money. For whatever possible happening there is a fair rule.
In the following video, Mike Presents Slicing Pie Model for Startup Equity Splits:
I encourage you to learn about his model by reading his book and use it for your own team. It would be great to use its tool to do Grunt Fund Calculation, but for the first step you can use the already created spreadsheet in the following link: https://slicingpie.com/the-grunt-fund-calculator/
It would be great to watch its video to learn how to use it properly.
voila! There it is! Wish you a wonderful and fun journey through creating your own idea and bring it to the real world.
(For my Persian friends: https://slicingpie.ir/)
I know there is still doubt and we can not be sure 100% about value of each contribution. But it was the best possible solution I’ve found. I believe by applying this structor there will be more clarity and more fairness.