Perfectly fair equity splits for bootstrapped start ups
Entrepreneurs and early-stage company participants get taken advantage of so frequently that we hardly notice. Bad equity deals are the rule, not the exception. The Slicing Pie Handbook outlines a framework for perfectly fair equity splits for early-stage, bootstrapped startup companies. Based on the dynamic equity model popularized by the book Slicing Pie, a formula in use by entrepreneurs all over the world.
The Slicing Pie Handbook will help you determine the right share for people who contribute the things you need to start your company including help, equipment, supplies, rent and even credit. You will learn how to fairly allocate equity when people contribute and how to fairly recover equity when people leave the company.
Why we love this book?
Slicing Pie completely changed our mindset about ownership. At the early stages of The Rookie Minds we started thinking about how to create a fair equity split between the founders. Fixed equity splits mostly do not work. Having been burned by traditional fixed equity splits in the past, we wanted a framework based on observable events and self-adjusts over time. To keep it fair, no matter the changes over time.
The basic principles of slicing pie are very simple. A person’s percentage share in profits should always reflect its percentage share in the risk incurred. Everything has a fair market value. Not only financial investments but for example also time, ideas and relationships. The goal of this process is to make sure that by appointing the observable items up front and get alignment and agreement on their relative respective value to the business, the equity is allocated fairly at any moment in time.
At Rookie Minds we only used two contributions: money and time. And the final equity split was made three years after the start up. But this was only the start of our changing mindset about running the company together. Currently, we share economic ownership with everybody working at The Rookie Minds, equally! And the founders? They get a founders-fee, if the results allow it, for the risks they have been taken. That’s how we run an everyone organization.