One of my advisors recommended the book "Slicing Pie
" to me. I started to read it, and couldn't put it down. The simplicity and fairness struck a cord.
The basic idea is that you don't formally divide up the company until you have a real financing event, like when the first outside/professional money comes in. Instead you pre-agree to keep track of the contributions of the team (time, money, pre-existing IP, etc.), creating a "grunt fund" that has no value but that will serve as the basis for dividing up equity when external financing or some other event sets a valuation. His argument makes sense to me - the equity has no value until it is priced, and figuring out fair allocations based on future contributions is impossible (vesting only helps a little with that), so any attempts to sort it out fairly and manage incentives are very likely to fail.
But that is all in theory. Has anyone done this?