Here is a question that’s been bugging me. How would you split equity in a business you are bootstrapping?
Normally I’d say a 50/50 split is fair, but it really depends on what “fair” really means.
There are arguments about making it a simple equation about money put in, but there are other factors (like time invested, availability (what you do for the business), etc). So it becomes really challenging to come up with a fair solution.
If one partner has “the idea”, but otherwise is not really doing much for the business, should they get an equal share?
@ecomba Now there's a question - would you have come up with the idea? If not, how much is that idea worth without implementation? How much is the implementation worth if there hadn't been that idea? Would it have even existed?
Also any split defines the risk too-what if NewCo goes bankrupt? What risk do the stakeholders bear? It should mirror the stake in success.
I don't have an answer, but do thrash it out early, get it written down and agreed early else it could be very painful later.
@ecomba My undergraduate thesis advisor told me: ideas are cheap. So I would definitely value execution/implementation more heavily.
@hnlee agreed with you thesis advisor! Ideas come and go, but only when we grab and nurture them (execute) they are allowed to grow