I am currently in a very good and stable job. Myself and my friend (investor) plan to start a school chain which is capital intensive and returns are expected only after 5 yrs of successful operation. The entire funding ( own fund+ loans) shall be arranged by my friend, whereas implementation is in my scope. For this I shall be leaving my job and work full time for the proposed venture. To sustain myself, I plan to draw a minimum salary for the first 5 years. In such a situation, how the equity pie should be divided. The investment will be to the tune of 150M (INR) phased out over next 5 years period. The funding shall be arranged by my friend thru his own fund + loans. My opprtunity cost (based on my current job) is 2M (INR) per annum and wish to draw 0.6 M (INR) per month escalated by 10% over next 5 years. How do we go about dividing the equity between us?
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Short answer: However you like. Longer answer: There is no set formula. Equity is usually divided in proportion to the overall value the person is bringing to the company. Some people bring value via cash, others bring value via skills. It is up to the two of you to determine and agree how much value you each are brining to the venture. |
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