Finally I'm getting myself a Co-founder but oops!
Shared by bukunmi · 16d ago · 16 comments

Okay, it's been about six months straight we've been working together on PayJa now and everything is pretty much interesting about designing/building the product. Initially, we are a team 5, then three left due to lost motivation as everyone was a volunteer enthusiastically working for free since day 1.

So I hired 2 two developers (on contract) and onboarded one helpful web developer freelancer to the team. Now, it's me and my co-founder heading the team. I am happy she is full of energy and positivity as a great UI/UX designer since day one of the PayJa project, creatively developed the mobile app UI/UX without hiccups.

I can't stop but continue to push PayJa forward. She's got my back.

Do you think it is too early to decide? I do most of the work tho and I did originated the project and all the executed ideas. I would say I did 95% of the work plus initial development investment (bootstrapping)/pre-seed, website, project management, talking to users and prospective investors, pitch deck, financial model, business plan, cloud/hosting resources and all except app UI/UX design.

Now I'm thinking about co-founder equity split. How would you share equity in this scenario? I am thinking about many factors that could influence the share split as I am technically the one who's got his hands dirtiest:

Ideation
Time spent
Sweat equity
Financial expenses
Technical resources
Cost of hiring HRs (freelancers)

Future contribution factors to consider include, among others:

Time to be spent on business development.

Ability to resolve future problems based on the individual’s professional connections and experience.

Value of opportunities lost to the individual due to his or her commitment to the startup.

So.. how do you quantify numerically the amount of equity that each co-founder is worth?

braddwyer · 16d ago
bukunmi · 16d ago

Yes I watched Michael Seibel's video about it. In fact, I'm currently enrolled in YC startup school but I was like aarrrghh! I did 95% of the work with the highest amount of energy! Then what's the point of having a co-founder if I'm gonna split 50/50 with someone putting only ~5% sweat equity+time into the project? Doesn't sound logical to me if we factor in all the points mentioned above.

I wanted to extract the numerical value a potential co-founder is worth, with all factors given quantifiably. That's my point.

However, I do not want to communicate to investors wrongly that my co-founder is worth only a 5% equity 'cause that just screams criticism (as per Michael's video). I'd rather not have a co-founder, most likely. But then, I may allocate ~5% equity to the early employee.

AndyDent-Touchgram · 15d ago

I did 95% of the work with the highest amount of energy!

OK, in 5 years time, what % of the work will you have done? Was she there from early on? How did you calculate 95%?

No 50/50 is not equitable but neither is 95/5 if she is taking a substantial risk and/or making a substantial contribution.

It is not clear from your post how much actual effort either of you has put in as hours or relative contributions.

https://slicingpie.com/ may help.

bukunmi · 14d ago

Just now, I found an objective calculator recommended for founders equity split. It is called the dynamic model and that makes sense to me.

https://foundrs.com/

bukunmi · 15d ago

Okay I based the calculation on subjective speculations. I will have a look at the link. Thanks!

kendsouza · 15d ago

Firstly why do you need a co-founder if you think you are doing all or most of the work.
On the other hand, you are saying she got your back..then make it 50-50, it is simple..it is fair..it is motivating.. and you are not laying the seeds for future conflict.
But the way you are over analyzing this..my 2 cents..you are better off without a co-founder for your own good.

bukunmi · 15d ago

Hi Ken,

I discussed with her about being a co-founder, a few minutes ago now but I never mentioned anything related to equity yet because I'm afraid I don't wanna screw up anything. Thanks for your input, so did (do) you have a co-founder? Did you split 50/50?

kendsouza · 15d ago

Yes..but it is a close-knit group and everyone has a equal split. I do not nickle and dime everything I do..by the way I do majority of the work but it does not bother me a bit. I love the tech, the concept, the business, the customers I interact with and I live every moment of it:) I got my 1st paying subscriber many moons ago..close to my 50th..by Jan I should have the 100th paying subscriber..target is 1000 by end of next year.

My advise..if you like your co-founder and it clicks with he or she..then that's all that matters. Don't get in the gutter with small things.

bukunmi · 14d ago

Thank you Ken, I have made up my mind and will do the split properly. Yes, she's great at what she does- Designing, Prototyping, and wireframing. And such skills quickly helped us plan the mobile app well. I have now added her in Pioneer as my co-founder.

kendsouza · 14d ago

I am glad you worked it out.
Now focus on getting those customers! :)

IPDevs · 15d ago

This may be contrary to some advises already given, but based on Michael Seibel's videos, and a lot more, it is best to split equity equally among founders.

Equity split should not just be based on how much the person has put into the Company but also how much you think the person would eventually add to the company. Obviously you can't do the work alone, so on the long run, how much activity do you think the person would put in for the company.

Investors also want to know that your co founder(s) is as serious as you are, so your equity split says a lot.

At the worst, you could decide to give your co founder a 30 - 40% split but a good amount of equity always increases the motivation and willingness to work.

Then, it is advisable to split your equity as early as you can. You don't want to be a profitable company, and due to a sudden disagreement on equity split, disintegrate. The earlier the better cos disagreements in the future can put the company in great danger.

bukunmi · 15d ago

Thank you. The last paragraph I find the most useful.

manojranaweera · 16d ago

Hey Bukunmi

Don't give equity away willy nilly. 5% equity vested over three years! You are the founder. She can be co-founder if she wants.

The problem arises the minute you start discussing about equity. Some people would work free for a long time. But the minute you start discussing compensation things could go sour. That's my experience.

All the best.

bukunmi · 16d ago

Sounds meaningful. Thank you!
What document(s) should state the terms of equity and vesting? Business plan? Probably not. Cap table, right? How do you organize a cap table? Do you have some useful template for cap table? I have never seen one and I'd like to.

manojranaweera · 15d ago

In the UK, you file shareholdings through a document called Confirmation Statement annually.

Most people manage cap tables through a simple spreadsheet internally.

bukunmi · 14d ago

Thank you.