Allotting fair stakes to founders if all of them are not equally involved in a startup

unentrepreneur

What is the best way to allot stakes to founders of a startup if all of them are not equally involved?
For example,
- Some of them are working full time and some of them still have their jobs and work part time.
- Some of them are ready to invest some money but some of them cannot invest any money.

We plan to keep stakes equal if it gets too complicated, but is there an easy way to allot stakes so that its fair to everyone involved?

Ganesh

@unentrepreneur:
The question looks too vague to suggest any possible combination. And it is very hard to device a formula or method for the same.

I will consider different combination's and give my individual opinion,

Having a job, investing and working part time with start up. - 30%
Investing money, not working with start up - 20%
Investing money, working fulltime with start up - 35%
Not investing money, working full time with start up - 15%(Some investment is mandatory from every partner just for commitment sake)
Free rider.(Not investing and Not even working with start up) - ZERO%(U bet there are some in this category too)

Assumptions:

Expenses of full time working partners comes from business, investing partners.
Investing partners invest in equal ratios.(33% in the above case)

Having equal stake in such scenarios is not at all Business. Such arrangement would not stand for a longer duration.

Would be interesting to know point of view of others too.

Sandeep

There isnt a exact formula as William says and you need to discuss and try to reach an agreement. To start towards this, you may find the link below useful:

http://www.andrew.cmu.edu/user/fd0n/35 Founders' Pie Calculator.htm

Sagar

@unentrepreneur : Technically those of you working full time have invested a lot more. The full-timers are the face of the company/product/service and they would be the ones customers and others would want to interact with and so on - in fact there could be legal issues involved with giving work to someone who is currently on payroll for someone else but that's a different subject.

My suggestion - those who are working full-time become stake-holders. The other can become early employees in which case you can give them stock options. I know that sounds unfair but for a start-up personal involvement counts for a lot.

william

It depends on who is bringing what to the table.

You could have a technically brilliant co-founder who may be unable to leave his current job due to obvious reasons, but is contributing equally in the limited amount of time he spares for the startup. Share percentages should depend on capabilities, contribution to success, experience etc. It's a business question, which I am sure does not have an exact formula, it's for the co-founders to brain-storm (may be negotiate) and collaborate as to what is best and agreeable to all.

rohittuteja85

Working partner should get a salary as you'd have paid to a manger hired from outside.

Idea Generator: should get 10% extra (as one would pay as royality to a franchiser)

Rest of the distribution: Assuming equal investment should be divided equally

william

Just make sure that while doing all the calculations, you don't loose track of your main objective, your product/service!

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