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Forming a new software startup, how do I allocate ownership fairly?

it's been pretty difficult for my team and I (as it is for everyone) to come up with equity numbers. I'm wondering if anyone could look this over and see what is reasonable. We are all close friends, and haven't made a big deal of it, but we all want it to be fair.

We are a team of 3 and I am the only one with tech experience. The other 2 are investing $4000 (I wasn't in position to up front), and will act as the business leads (where we will all contribute).

We are currently paying a developer (not part of the team) that I know to develop the major components of our application for about half our total cash.

I am responsible for all wireframes, web design, frontend, ux and a fair amount of backend + server work (working together with developer) and all maintenance going forward.

Currently we've been talking about numbers like 35/35/30 where I take 30. Is this reasonable given the limited information I have provided? Am I selling myself short/should consider myself lucky?

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marked as duplicate by Zuly Gonzalez♦ Aug 17 '12 at 14:03

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3 Answers

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I think you should all just split 33/33/33. You're all in this together. $4000 just isn't that much money in the large scheme of things.

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If you wanted to give your company a valuation v their capital investment v the goodwill from your business connections. But if it is too early, I personally think you're in an ok position. You own 30% of the business and you still have 4000 hypothetical dollars in your pocket. 5% of a $1M is $50k but you'd still be walking away with $300k.

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Face Value

If they are going to step up and take over the other roles and your not putting any money up to start with ... then your probably in a good enough position.

The longer term view,

I personally prefer to run with an even split, especially between friends.

If it goes well then your going to be doing this for 10 years or more. From that perspective it is FAR more important to make sure the relationships between everyone stay strong.

This is hard to do for any relationship, one key strategy is to make sure there is no 'grit' that wears away and causes issues down the track ... believe me, enough of those things will come up naturally without you building in inequity to start with.

If I were you I would be talking to them again and suggesting a 1/3 each, when I started my business we did the same and one of the other partners couldn't match his side, so he did enough "extra" work in the business setup and early stage to justify his contribution ... that was 15 years ago, he and I still run the today.

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