legal, equity, profit-sharingThree people are establishing a startup; each will be acting as one of the following: CEO, CTO, COO.
What are some of the common structures for such scenarios?
How much equity should each get equally divided?
How many shares is that?
What is commonly left for investors and advisors and future hires in the pie?
I know every startup is different and should be tailored accordingly; but I was wondering if there are more common set ups that are favored or utilized?
Here’s an article I really like that talks about this:
https://gist.github.com/isaacsanders/1653078
Basically, you divide everything equally at the top level of management so that the founders feel evenly yoked.
Then there are typically 5-6 layers of employees added during the growth period (typically 5 years). By the end— founders will own 50%, and each layer splits 10%. Any money raised by investors dilutes the existing shares.
I like the Isaac Sanders article @Josh provided in his answer.
The only way I can think to improve upon in is to consider the scenario when it is clear that the co-founders should not receive an equal number of shares. For example, if one quits his job to work full time and another does not. Or, it's one co-founder's idea and code and the other just does some presentations. (Writing code is about a million times more difficult and more important to success.)
In that case, my favorite method is to actually pay co-founders for their work in the form of shares. For example, let's agree that writing code pays 100 shares per day. Doing a presentation pays 1 share per day. Something like that. Then keep people accountable for the number of shares they earn by posting the ownership on a shared Google Sheet for transparency and showing their work product to give the other co-founders an opportunity to object if they think someone earned shares without doing the appropriate amount of work.
And make a cutoff period when one can raise objections about share allocation. Say, two weeks. So if there is no objection after two weeks of issuance, it's a done deal. No more arguing about it. You had your chance. Again, a shared Google Sheet helps a lot with this for transparency.
An alternative method is to use this tool.
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