The Co-Founder Equity Calculator Eclipses 250,000 Uses
Co-Founder equity is one of the hardest things for any startup to sort out. At the startup level there’s two big issues.
The Tech Person We Just Met
Startups often times find a tech person. Perhaps it’s by way of introduction, or at an event. But somehow that tech person they just found is the magic ingredient. It’s the one person that can actually finish out your technical feats. But see, you don’t know this person from Adam (or Eve). So the guy or gal that’s going to breathe life into your startup and make it go, how much equity should you give them. The conversation often times goes like this:
founder: hey dude (or dudette) I would love to have you join the team. With your tech skills and my brains we can take the world by storm. We can be the next Facebook, the next Uber the next Google.
Tech person: yeah, that sounds great. So what are you going to pay me?
Founder: so you know we’re boot-strapping this thing. I’ve sold my car, moved back into my parents basement, wash my clothes once a month and eat Ramen noodles and peanut butter and jelly, you know the startup life.
Tech Person: yeah I feel that.
Founder: so you know I was thinking since we can’t pay you a salary, I’m going to give you 5% equity,
Tech Person: 5% WTF dude?
Founder: Well you know we’re going to be the next Google and with a market cap of $500 billion that would be like $25 billion dollars.
Tech Person: oh ok I get that, Let’s do it.
Then, we meet the co-founders friend. He couldn’t code his way out of a wet paper bag. He can’t develop polaroid film, and you wouldn’t in a million years take him to a networking event. He or she is completely useless, except well they’ve been your BFF since the 7th grade. You know the person along for the ride. That person has 40% equity, and contributes squat. As the founder of thestartupconference.com points out, that guy or gal could end up having you in a law suit. That could be a mistake worth millions of dollars.
That’s why they created The Co-Founder Equity Calculator in the summer of 2011. The calculator asks a bunch of questions that come up in every co-founder discussion. After you answer the questions it goes to work. Magically, it comes up with a decent, and fair amount of equity to give to a co-founder based on their true contribution to the startup.
You know you want to try it, find it here