Equity distribution · Lawyer

How do you explain the slicing pie model to a lawyer?

Shingai Samudzi

March 12th, 2015

My cofounder typically vets any contracts that are drawn up with a personal lawyer. We started out with a fixed equity split, but we agreed in principle to move to a dynamic equity split a la Slicing Pie. I worked with a slicing pie lawyer to have a slicing pie boilerplate drawn up. My cofounder's lawyer conceptually just doesn't seem to grasp what's going on at all, and his influence over my cofounder is such that my cofounder is starting to doubt dynamic equity splits altogether.

Has anyone encountered this type of scenario? How have you dealt with attorneys who are clueless about dynamic equity splits?

Robert Clegg

March 13th, 2015

Shingai, you still need an attorney that represents the corporation and not the founders. What you draw up may not be legally binding if you don't do this correctly.

The attorney MUST notify each party that the attorney represents the corporation and not them individually. You must be represented by outside counsel or wave that right. It is KEY that the corporate attorney notify you as such.

This is one of the fist "ah ha" moments of shock an entrepreneur has when the attorney(s) explain to him/her that they represent the company and not him/her.

If your attorney hasn't done this, you probably need to find another.

Robert Clegg

March 12th, 2015

Which lawyer represents the company?

Eric Wold

March 12th, 2015

I have dealt with attorneys who are clueless about dynamic equity splits by:
  • Using initial generic documents they provided and doing my own edits.  Maybe that's not for everybody, but if you've studied contract law, or just have a decent amount of common sense.. it works quite well for me.
  • Creating a structure where a fixed block of shares will be awarded at certain milestones, usually a calendar quarter.  The shares up for grabs will be split for that period as determined by billable contributions made by the eligible participants.

That second part especially seems to be a bit easier to grasp for some lawyers.

Shingai Samudzi

March 13th, 2015

Thanks all, for the responses.  My cofounder and I had a good heart to heart meeting.  He stated that he trusted my intentions based on our past experience together and would discount his personal attorney's confusion.  We're going ahead with slicing pie.

Shingai Samudzi

March 13th, 2015

@Robert that makes sense.  Would you happen to have any recommendations for startup friendly lawyers in the Bay Area?

Robert Clegg

March 13th, 2015

Pillsbury, Wilson Sonsini.  Best if you go to one of the startup events or programs sponsored by a law firm in the area. if you are part of an accelerator you can get a good introduction as well.