4 Things to Consider When Splitting Equity in Startup
Beginning a venture with friends is a great idea. Even if you aren’t super close to your partners, it’s great having someone to share in the process of creating a business that you are passionate about.
When everyone is clear on what needs to be done and what has been done, there should be no issue when it comes to splitting the pie. Everyone should benefit from the work that they put in, but the truth is, this is sometimes a lot easier said than done. So much goes into coming up with “fair” splits.
So here are four steps to make when splitting the equity in a start up.
This is a very important and fair way of cutting up the pie. What each person is putting in when it comes to time, etc. should be clearly noted and addressed when it comes to divvying things out. It really helps to talk this part out because you don’t want there to be any changes in expectations..
Many times there are a few founders or investors in a start up because of funding issues. Here, whoever put in the most money will obviously hold the most weight in getting equity and even making decisions.
Depending on the positions set up in the company and how each position functions, this can be a major and very realistic way of looking at where the equity goes. This is where tiers come and serve as a good indicator of what each person should get.
The person who came up with the grand scheme of it all more than likely holds the most weight. There is a big premium placed on being the originator of a project or start up as it should be.
It may always be a tricky thing when taking about who gets what but it is a conversation that needs to be had to ensure that everything is as it should be.
ABOUT THE AUTHOR: RICA ELYSEE
I recently left my career as a Development Executive for a national organization dedicated to educating African American men and their families about prostate cancer. I graduated from the University of Wisconsin-Milwaukee with a Bachelor’s Degree in Political Science and Women Studies. I’ve served as the Development guru implementing the unique strategy of listening to donors at the outset to develop Nurses Care for Haitian Children and the Prescott Area Women’s Shelter. I’m the Co-Founder and CEO of BeautyLynk, Owner of Boston Naturals and Editorial Director for Amour Creole Magazine. I’ve serviced clients such as the International Association for Human Values, Athletic Kids Association in San Diego, and Nurses Care for Haitian Children.