Equity distribution · Founder equity

Team mate demands both IOU notes for each hour work AND equity.

Bela Demtchouk Innitiator

Last updated on November 22nd, 2017

This is all just from Startup weekend. I pitched the idea and we ended up taking 2nd place. This team member is a technical talent but contributed nothing of value. (The designer created the wire frames we ended up pitching to the judges.) Now he is telling me he has multiple parallel side projects (aka, he is not committing to working on a prototype. Moreover, he is only interested in pursing if he gets IOU note for each hour worked and a stake in the final company.


Remember, at this point there is nothing more than wireframes, so I feel a little vary of a team mate that only cares what his cut will be.


I offered him an hourly IOU note at senior developer pay that can be converted to equity if idea/company gets traction and profit. Just IOUs or just equity were my original offers, but he refuses. He insists that I am unreasonable and I am steamrolling over his request.


What to do?

Austin Johnson Free Agent - AustinJohnson.me

November 22nd, 2017

You may need a dynamic equity model that tracks the hourly inputs from each founder, and adjusts the equity split accordingly. Check out Slicing Pie . Even if you don't use exactly what the book prescribes, it will give you a good model and understanding for quantifying and tracking the various types of risks and contributions from your team.

Selvan Rajan

November 23rd, 2017

Both of you have valid points. What I would suggest is put a dollar value to each hour, and have the option to pay either as cash, or cash plus equity or equity whenever the company's financial situation changes: maybe a funding event of $1m or more. You also need to give him equity for the position whatever it may be with the usual vesting period of one year cliff and for four years.