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Business / Entrepreneurship

Startup Equity Calculator: How to Divide Up Startup Equity

Learn to split the founders equity pie with the ultimate calculator for smart and fair pie splitting for startups.

Description

So, you have a great business idea.You grab your two best friends, get all excited, and then start a company together.


In your haste to get started, you and your two cofounders decided to divide the equity evenly in thirds--it seemed the obvious and fair choice then.


Two months later, just as you're starting to get some traction, one of the "friends" changes his mind and drops out entirely. But for the work that he did, he believes he should still keep his 1/3 share of the company.


The two of you left are now essentially doing all the work, but for only 2/3 of the company. 


Still worth pursuing? Maybe. 


But you definitely won't be happy.With 'deadweight' cofounders with significant equity stakes, you'll be lucky if you could attract any new team members or investors.


Don't make this dumb mistake. My course and my calculator will allow you and your cofounders to have a collaborative and transparent conversation how much of the company each person should get.


_____________________________________________
Look, starting a new venture is hard enough, but having to figure out what is fair for each cofounder shouldn't be the hardest thing.


By taking this course and using my easy to use startup equity calculator, you'll learn some ways on how to avoid this unfortunate, yet preventable situation. And you and your team might even have fun with the pie slicing exercise!


Through the course, you'll learn what you should into your equity pie considerations and how to use a systematic approach for calculating each founders fair share, collaboratively and openly.


While this course isn't intended to provide you with the THE "correct solution", it will give you and your team a great starting point.


And it'll make easy an often awkward conversation about who should get how much and why.


Deciding and agreeing on how to divide the initial equity pie is no trivial task, but this tool will definitely help get the conversation going on the right path by forcing you and your cofounders to decide on what are the key milestones for your venture and how each of you are going to be making your contributions.


What if your starting a more traditional business?


Whether you're going for a high growth type of startup or a more traditional startup with known benchmarks for revenue and cash flow, I've got you covered.I'll explain to you which of the TWO frameworks and tools you should use depending on the type of venture you're starting up.


Take a look at the preview lectures to check out the calculators in action and you'll see how they can help you and your cofounders with having a smart and equity conversation about splitting the pie.


Good luck and happy slicing!

Full details

Curriculum

  • Too Long Didn't Watch!
    DOWNLOAD: Founder's Pie Calculator v1.6
    Download this model to follow along in the next lecture.
    TLDW (Too Long Didn't Watch!) Course Summary
    This is a condensed summary of the course. For the busy founders out there, just download the calculator and follow along here. It should be pretty self explanatory how to utilize the calculator to suit your own needs. But if you want to dive a little deeper with examples, then keep going. Happy slicing!
    8:30
  • Why a Founder's Pie Calculator?
    What This Course Will (& Will Not) Do For You
    It's meant to provide an additional tool for you and your team to arrive at a great starting point. It's not meant to give you a specific, "this is it" recommendation for how much equity person should ultimately receive.
    1:02
    Don't Divide by N
    Divide by N if you want to guarantee yourself some future headaches.
    1:44
    Course Objectives
    Remember, this is meant to be a tool for you and your teammates. Nothing more.
    0:49
    Founders Pie Calculator Overview
    Intro to the calculator.
    3:39
    Waterfall Framework Overview
    What is the waterfall and who should use this instead of the calculator?
    4:22
    Which Should You Use?
    Decide which framework is better suited for you and your team.
    1:38
  • Framework #1: Founders Pie Calculator
    Considerations Overview
    Overview of important considerations when dividing the equity pie.
    0:44
    The Value of an Idea
    3:26
    Cash Contributions
    2:52
    Skills
    2:11
    Other Things That COULD Be of Value
    1:08
    Milestones
    1:39
    Don't Use This for Vesting
    2:41
    Founders Pie Calculator Model - How to Use It
    16:14
    DOWNLOAD: Tech Example #1File
    Download this file to follow along in the next example.
    Tech Startup Example #1
    14:49
    DOWNLOAD: Tech Startup Example #2 File
    Download this file to follow along in the nex example
    Tech Startup Example #2
    9:11
  • Framework #2: Waterfall Model
    Why Use The Waterfall Framework?
    Who should use the waterfall framework?
    1:24
    DOWNLOAD: Waterfall Framework v2.1
    Download this file to follow along in the upcoming examples in this section.
    What is the Waterfall?
    11:54
    How to Use The Waterfall
    12:06
    DOWNLOAD: Restaurant Example with Waterfall
    Download this file to follow along in the next example.
    Waterfall Restaurant Example
    15:23
  • BONUS Section: Additional Waterfall Example & Explanation
    Waterfall Optional Section Intro
    The following section does a deeper dive into the waterfall framework. Although the example uses real estate investments to illustrate the framework, it could be applied to any business venture where cash from profits will be distributed to its members on a regular basis.
    1:11
    Investing with Others Intro
    Overview of this entire section.
    2:30
    Why Invest With Others
    Pros of investing with others.
    3:38
    Risk of Investing with Others
    Cons of investing with others, if not done right.
    1:35
    Intro to Waterfall
    What is the waterfall
    10:59
    DOWNLOAD: Waterfall Examples Exercise
    Download this file for the upcoming examples.
    Example Intro
    The sample investment (you can substitute with any sample business) used to illustrate the different waterfall examples in this section.
    2:17
    No Waterfall
    What the breakdown looks like if we did prorata between the parties
    4:20
    Two Tier Waterfall
    What the profit breakdown looks like if we did a 2-tier waterfall.
    3:20
    Three Tier Waterfall
    What the profit breakdown looks like if we did a 3-tier waterfall.
    3:48
    Four Tier Waterfall
    What the profit breakdown looks like if we did a 4-tier waterfall.
    5:28
    Waterfall Summary
    Summary and comparison of the different waterfall structures applied to the same investment.
    5:53
    Which Waterfall To Use
    So which should you use?
    2:21
    What Happens When Investment Loses Money?
    Let's explore what happens to a money losing investment using the different waterfall structures
    0:36
    Money Losing Waterfall Example
    Comparison of the waterfall structures for money losing investment
    5:03
    DOWNLOAD: Fix & Flip Model with Waterfall
    Download this file to follow along in the next example
    Fix and Flip Waterfall Model
    Exploring a fix & flip investment with a waterfall structure
    5:30
    DOWNLOAD: Rental Income Model with Waterfall
    Download this file to follow along in the next example
    Rental Income Model with Waterfall
    Exploring a rental income property with a waterfall structure
    8:19
    Final Tips
    Some final parting tips on usage of the waterfall.
    1:55

Skills

  • Entrepreneurship
  • Equity
  • Start-Ups

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