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I have gone through all the related questions regarding my case on the website. I still feel that I could post my question because it is different from the others. Please share your thoughts. Thanks.

a. F1 brings both the IP and Idea that is instrumental to develop the product which company plans to sell.

b. F1 and F2 equally share responsibilities to develop the business model, approaching investors, potential customers, identifying target markets, etc. (all related to business)

c. F2 has more professional experience (non-critical to the startup) than F1.

d. F2 joined F1 who has already left his job and has been working towards starting a company.

What's a fair F1:F2 equity share?

Edit: Thanks for your suggestions. But, let me put it this way. The company is a product development company in a niche technology, untapped market. F1 has worked and studied in the same over the past few years and developed IP in it alongside with patents related to the same. Does the share still remain the same?

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4 Answers

up vote 5 down vote

Sounds like 50/50 to me.

Nothing in here actually sounds critical to the business. That's right, not even the idea/IP, because that will change over time anyway.

Neither one of you is unquestionably more qualified or more necessary or has put more skin in, so 50/50 sounds fair.

However, if the immediate compensation is different (e.g. someone needs a salary but the other doesn't), that should certainly change the balance.

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+1 : It is point (b) in the question that makes me agree 50/50. All this who-joined-who is crap. All about division of risk AND the potential reward – Aiden Bell Sep 25 '10 at 22:49
up vote 1 down vote

I used this for my start up and has pretty much worked well so far.

Hope this would help you http://www.andrew.cmu.edu/user/fd0n/35%20Founders%27%20Pie%20Calculator.htm

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+1 for the Founder's Pie Calculator. This is a really useful tool. – Susan Jones Feb 21 '11 at 10:34
up vote 1 down vote

Additional thing that apparently people don't consider: you should have a vesting schedule for both people so that the ownership (whatever it is) will accrue over a period of time (say 4 years) to make sure that if one person stops working for whatever reason, it won't get unfair portion of the business. That was an issue e.g. with Facebook when a co-founder simply stopped working on it and ended up with huge chunk of the company for almost no work.

As to the question: the way you phrase it, you clearly want to hear that F1 should get more.

There is no rule that says what the percentage split should be. It's all about negotiation between interested parties. It doesn't matter what other people think a fair split is. All that matters is what percentage you want and whether you can convince the other person to accept it.

It's unclear from your post if F1 really owns the patents. It's possible but unlikely since individuals rarely apply for patents (it's expensive) and patents granted while employed are owned by the employer.

If, however, F1 really owns, say, 2 patents relevant to the business, the cost of obtaining them (the internet says: $5k-$15k based on complexity plus attorney fees) should be counted as cash investment in the startup and therefore change the share split based on valuation.

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up vote 0 down vote

Pretty good founders calculator, not sure it would be a huge asset for you but I'd try it out.

http://foundrs.com/calculator/index.php

My gut would say F1: 60 F2: 40, it's worth something for someone to be passionate about it enough to quit and pursue it fulltime on their own and then be open to bring in a partner for help.

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