Big News: FounderDating is joining OneVest to build the largest community for entrepreneurs. Details here
Latest Notifications
You have no recent recommendations.
Name
Title
 
MiniBio
FOLLOW
Title
 Followers
FOLLOW TOPIC

Question goes here

1,300 Followers

  • Name
    Entrepreneur
  • Name
    Entrepreneur
  • Name
    Entrepreneur
  • Name
    Entrepreneur
  • Name
    Entrepreneur
  • Name
    Entrepreneur
  • Name
    Entrepreneur
  • Name
    Entrepreneur

Slicing Pie - Two Grunt Leaders?

I'm in very early stages with a potential co-founder. We are very much in the dating phase, but we seem to be connecting quickly. Although I feel I can trust him, we have really just met and I don't know anybody who can vet him.

I proposed using Slicing Pie to divide up the equity, because I think a dynamic equity split really makes sense for us. He seems to think it has potential. One of the key concepts in Slicing Pie is that there is a Grunt Leader who holds all the equity and then divides it up based on effort, cash, resources, etc. I feel like we're both equal partners, so this makes me uncomfortable, even if we have an Operating Agreement.

But is there a way we can have two Grunt Leaders?

8 Replies

Peter Pudaite
1
0
Peter Pudaite Entrepreneur
Technology Strategist and Tinkerer
Here're a couple of ideas:

  1. Split the equity 50:50 between each of you as two Grunt Leaders and reallocate the equity collaboratively on an equal basis.
  2. Have 98% of the shares set aside for stock options. Grant of options requires both your signature/agreement as Grunt Leaders.
These are untested ideas so, the practicalities are as yet unexplored.
Greg Welch
0
0
Greg Welch Advisor
Founder, President & CEO at SquishClip
Peter is right, have this as options that vest over time based on performance. The last thing you want would be for him to walk away without having done his part, contributed his grunt effort. If that would happen with options, you aren't out the full equity and needing to find another co-founder to do the work.

Thomas Jay
0
1
Thomas Jay Entrepreneur
iOS / Server Architect / IoT / BLE / iBeacon / Apple Pay
I'm a big believer in the concept of one person holding the whole pie. All the corp paper work is so much simpler.

Most startups that have employees with stock wind up not paying anything in stock since they have a multi-year vesting and if the startup does things right it can sell everything before any of the shares wind up vesting. I've seen this many times. If the employees leave before the vesting they get nothing.

Why not the same thing for co-founders. If one person does all the paper work then the other can just have a contract based on the Pie Slicing agreement.

This makes it so much simpler when the co-founder bails from lack of interest, there is no chasing them to get papers signed which can always be an issue. No tax issues when filing since there is no stock split yet.

I think unless they are actually putting in cash, you should keep it simple and just have an agreement that details what the expectations are. Be very upfront that if the expectations are not met that there is no stock transaction.

You also need to make it clear that any and all work performed by the co-founder is owned by the company, I see time and time again where a partner leaves and thinks they can take their work with them, even thought they have not gotten any payment its still owned by the company and is company assets. Lots of developers do not understand this concept.

Keeping control is always the best, do not dilute the stock until there is investment if you can. Always keep in mind that this is a marriage and you need an easy way out, always think of the divorce.

If you don't trust anyone then its all simple.

If you trust someone they will burn you.

Live is good until you have one of two things. Money or customers. Both of these tend to make people greedy, that's when the shit hits the fan.

I like keeping all the corporate stuff until the very end, write up an agreement, work on the product, get ready to market and beta test, then do all the paper work. No reason t setup a corporation when the founders give up in a few weeks, maybe from lack of interest or lock of money. Not everyone can live without a paycheck :)


Gillian Muessig
0
1
Gillian Muessig Entrepreneur
COO, Board Chair at brettapproved, Inc.
Weighing in and agreeing with the process of each of you taking a small amount of shares - between 2 - 10% now. Set reasonable goals and benchmarks for each of you and have stock vest based on achieving those goals in a timely manner (means you need dates on each). This helps you focus on what will move the needle in making your company a success and helps each of you to acquire stock according to your performance.

Intelligence, commitment, industry knowledge connections, ability to market, sell, drive IT, etc... all are critical for success. In the end, only actually achieving what you promised to achieve is worth stock ownership.
Mike Moyer
4
0
Mike Moyer Entrepreneur • Advisor
Managing Director at Lake Shark Ventures, LLC
The role of the Grunt Leader is really just to keep track of all the inputs on the spreadsheets or Pie Slicer software.

There are some issues with one person holding all the equity that I wasn't aware of when I wrote Slicing Pie(I'm planning on fixing that in future updates).

Here is how you can handle your Grunt Fund and address issues of control, which I think is one of your concerns. Of course, you'll have to speak to your lawyer/accountant for professional advice, but here is a basic structure:

First, keep in mind that there are no financial benefits to equity ownership unless the company pays dividends or gets sold.

So, issue 10,000 restricted shares or membership interests to every person who joins your company. In this case, it will be you and your partner. In a C-Corp each person can file and 83(b) election. The restricted shares won't have voting rights, so the number of shares and the fact that each person has the same amount doesn't really matter.

You and your partner can vest one share each giving you both one "vote" for major decisions.

In your stock agreement you will want to include a "re-calibration" clause that will trigger in the event of Series A investment or cash-flow break even.

When the re-calibration is triggered, each person will vest in the number of shares that brings them into alignment with the Slicing Pie split. All non-vested shares would be forfeited.

This way you and your partners have maintained joint control of the company, properly managed taxes, and ensured that each participant has the right % of the company when the Slicing Pie model ends.

Remember, the Slicing Pie model addresses all possible scenarios. The allocation rules and the termination rules combine always leads to a perfect split!
Chris Rider
0
0
Chris Rider Entrepreneur
(Founder) Director, R&D/Tech at DirtGlue Enterprises, www.dirtglue.com
Put the equity (shares or whatever) in a trust and have a neutral attorney act as the trusttee. The percentages are then doled out from the trust in an ongoing basis that is based on performance.
Stan Zhekov
0
0
Stan Zhekov Entrepreneur
CEO, Reverd.com / Owner, Space Master Interiors
Hi Thomas,
I agree with you. Things must be kept simple at the beginning.
I want to go this way too.
Could you provide a template for a contract based on the Pie Slicing agreement? or a link where can I find one

Thanks
Mike Moyer
0
0
Mike Moyer Entrepreneur • Advisor
Managing Director at Lake Shark Ventures, LLC
Hi Stan,

Slicing Pie is very simple!

You can find lawyers and agreements here:http://slicingpie.com/silcing-pie-friendly-lawyers/

-Mike
Join FounderDating to participate in the discussion
Nothing gets posted to LinkedIn and your information will not be shared.

Just a few more details please.

DO: Start a discussion, share a resource, or ask a question related to entrepreneurship.
DON'T: Post about prohibited topics such as recruiting, cofounder wanted, check out my product
or feedback on the FD site (you can send this to us directly info@founderdating.com).
See the Community Code of Conduct for more details.

Title

Give your question or discussion topic a great title, make it catchy and succinct.

Details

Make sure what you're about to say is specific and relevant - you'll get better responses.

Topics

Tag your discussion so you get more relevant responses.

Question goes here

1,300 Followers

  • Name
    Details
  • Name
    Details
  • Name
    Details
  • Name
    Details
  • Name
    Details
  • Name
    Details
  • Name
    Details
  • Name
    Details
Know someone who should answer this question? Enter their email below
Stay current and follow these discussion topics?