Overview: -40K Funding from an investor -Single non-technical founder -Company has a Beta up and running with a few thousand users at 2 universities -Company has 2 existing paid contracts and 3 verbal agreements with other universities -Expected exit within 3 years at 30M Existing Employees: -Part-time Lead Web Developer (10%, 4 yr vesting, built MVP from scratch as original developer) -Part-time Senior Web Developer (2.5%, 4 yr vesting, recent hire) -Full-Time VP of Biz Dev (4%, 4yr vesting + commission, recent hire) Technical Co-Founder: -Full time commitment, would be a true partner, would lead our mobile development and potentially oversee web development as well later on as a CTO -Very strong technical and interpersonal skills -Current salary 230K

This is a very easy problem to solve with an exact answer. You should use the Slicing Pie model for equity allocation and recovery.

When someone invests time, money, ideas, relationships or anything else into a startup they are taking a risk. The value of that risk is equal to what they would have otherwise been paid by someone who could afford to pay them. This is known as fair market value.

The Slicing Pie model measures relative risk of the various participants and allocates equity accordingly. It converts all contributions to "slices" (a fictional unit of risk) using a function of fair market value and a risk multiplier. So, a person's share is equal to their slices divided by all the slices. The result is a perfect split!

The model also determines the right buyout price (if any) when someone leaves the company.

I've written a book on this topic, called Slicing Pie, and you may have a copy if you send me a note through Clarity or through


Answered 5 years ago

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