Equity distribution

Equity between part and full time founders

R R Cofounder and Tech Expert

September 23rd, 2019

Hi guys, I have been working with a partner since last 12 months on an idea. It was the partner who came up with the idea and i have implemented it fully, understanding was that I hold the tech part and he the business development. I have developed the tech completely now with apps, webapps and have born the cost of the servers, freelancers etc.We have been discussing on equity for long with no agreement. He has been full time on this project and i am working part time but both have invested money and the only clich is that i am part time, so he is insisting to give 25% and he keeps 75%, is it fair deal?

Even if i come full time, he insists that since risk is less now , i cant get more equity.

P.S: We have not launched the product yet, its launch ready

Arsalan Amdani Founder of LiveWire Group - Software Investment Firm

September 24th, 2019

I too have started a venture or two with just a handshake which did not end too well. However, in your case, I do not think it is time to go to war or write off anything just yet.

Your partner had the initial idea and has taken a considerable risk by working full time on this project. You need to value his time as greater than yours and appreciate the opportunity cost of him not working another job during this time. The idea also holds value.

On the other hand, your technology input and investment is likely going to be what takes this from being an idea/project into an actual business. I suggest you guys look up the slicing pie model for the equity split. This is the best way for you both to weigh out each others contributions into actual dollar values and determine.

The beauty of this model is it will not only help you agree on the split today, but will continue to do so throughout the early stages of your business. It is great for founders fond of logic. I hope it works out, good luck!

Paul Garcia marketing exec & business advisor

September 23rd, 2019

It may be too late to negotiate successfully with this person. Deciding the split of ownership and how it is based is something that you do before you conduct work, for precisely the reason you have run into. Are you willing to walk away? Perhaps your partner needs to understand that you will take your technology with you if a more fair arrangement isn't reached. Ideas are not worth anything without implementation. It appears you have provided the most value at this point. Of course the actual situation is opaque to us. The mistake here was proceeding without an agreement. Good luck.

Ryan Farber I'm an individual looking to build some cool stuff

September 23rd, 2019

The main thing I hear right now is your partner is unwilling to negotiate fair terms in your eyes. There was no contract in place which outlines the company's assets including the IP and distribution of profits/returns.

I have run into this situation before and here is my take from personal experience (I had a lawyer involved):

1. You sign away all rights of the IP you created and move on.

2. Start a costly legal battle which will bleed you dry in he said she said fashion.

3. You both agree in giving each other access to the IP and business contacts with a clause you can compete against each other. In a "let the best man win competition."

They all end with the same outcome that from what I am hearing you chose the wrong business partner. If you fight over money and a company that hasn't made a dollar and has no traction then you are in for a long haul my friend.

The decision is in your hands, good luck!

P.S. Welcome to business 101 - Contracts, Contracts, Contracts!!!