This statement is born out of a couple of other posts I've had on here and a continuing theme that comes up again and again...
"If Alexa has an idea, it means nothing and Alexa is not the person who gets to decide who gets what equity"
The theory is that Alexa (the founder in my example) may not have any requisite skills to help turn the idea into a business and their only contribution is the idea. There has been a lot of discussion about whether a tech co-founder who comes along later should be "given" X% equity, as though Alexa already "owns" all shares and can decide who is entitled to what percentage. Alexa owns nothing. Or put another way, Alexa owns 100% of zero.
My hypothesis is that Alex should pull together a founding team (tech, sales, etc) and on day zero, the entire team has full and equal say. There is no individual "owner" at this point. The entire group is equal. It is only at this point that the group of equals can begin to look at models for splitting the equity once the business begins to form and later trade.
Thank you for this excellent question. As I read it I unearthed a few assumptions inherent in both the view of Alexa, and the Tech co-founder. For instance, in 1955, Katz suggested that there are three skills of an effective administrator:
These skills interlock with technical being the foundational and most commonly held skill, human skill less so, and conceptual skill being rare. Good leaders need technical skill in that they need to know the technical domain in which they are working. Great leaders have profound human skill and the capacity to network, to initiate and maintain relationship for healthy culture and growth. Exceptional leaders, though, have conceptual skill, the capacity to understand where an organization is, and the weak signals that alert the leader(ship) to where the organization needs to go.
Let's apply this Rubric to Alexa. She has technical skill in that within a given area she identifies a need or problem. She has human skill in that after recognizing the team she does what Jim Collins calls "getting the right people on the bus" - exceptionally hard and pivotal to the success of the new venture. She has conceptual skill because she understands where the organization is, and where it needs to be and she draws in the right resources to accomplish this.
Now, with all that skill, two questions prevail:
1. Should she give away her IP (the most valuable part of the startup) simply because she may lack the breadth of technical skill that others have?
2. If she gives away the IP away by making others co-equal will she continue to exert the skillsets that started the company in the first place?
In my opinion the idea is what makes money but I agree that Alexa may have come up with the idea and that the inception of the concept requires much more than the idea,Alexa requires a team to help launch the idea to become an income generating idea
100% of zero.
Ideas are as ethereal as a dreams. They are the starting line of trillions of races never run and billions of races never finished, most rightly so.
FAITH is the true form of equity.
From risking all you have on an idea, to getting behind one with some of your personal cash, to taking a big pay cut for a chance at something big, to staking your reputation on it as a good investment, to working way to hard to ensure its the best so those options you have will reflect it in a few years time.
So 100% of zero is at the same time nothing and everything.
@Stephen Seymour - beautifully put!!! It is a bank holiday here in the UK and I am going to leave cofounderslab behind for a few days - and reflect on the poetry of your comment ;-)
It makes so much sense to me, I just wish it would to the many who still don't value the contribution of others in (or potentially in) their team.
hear hear @Michael ;-)