Toronto

Hi Brent,
 
You should consider 2 facts when you want to divide the equity of your startup with your cofounder(s):
 
1. The amount of resources (time, energy, money) you've invested in your business before they joined. In other words, you shouldn't give them much equity
2. Your cofounders won't have enough motivation if they have very few shares. (Unless your startup has a considerable valuation)
 
As you can see these 2 facts have conflicts somehow, but you should take both into account.
 
For me, the best way is to convert everything into a quantity-based metric (money for example) then divide shares based on that.
Take this example:
<ul><li>Your input:
 <ul><li>$110K investment</li>
 <li>2 years of time = 2*$90K (your fair annual salary in the market)</li>
 <li>$100K (your salary -market value- for the upcoming year) - You're not receiving this salary, it's just an indicator of the value of your time.</li>
 </ul></li>
 <li>Your (potential) co-founder input:
 <ul><li>$0 investment</li>
 <li>$120K (his/her salary -market value- for the upcoming year) - for example he is an expert technical guy</li>
 <li>$30K He has a valuable network of people (you should spent $30K to build the same network if you want to do it yourself)</li>
 </ul></li>
</ul>So the amount of your input is $390K versus the co-founder's input which is $150K. So the cap table could be 27% for your cofounder and the rest for you.
 
In this example, 27% is relatively fair equity and also gives enough motivation to your cofounder, but if the calculation comes up to 97% for you and 3% for your cofounder, you should add a little bit to his/her equity to make sure he will remain motivated. (for example 90% &amp; 10%)
 
Another thing I have to say is that there are many ways to protect your equity in case after a couple of months you find that this is not the right person for being a co-founder. I advise you to search for these terms: Vesting and Cliff, Preferred Stock, Anti Dilution.
 
Wish you success in your venture :)

Hello everyone,
 
I'm launching a crowdfunding platform and I need some legal advice.
The platform will work with donation/reward-based model and it will raise funds from all around the world for projects all around the world (not necessarily located in Canada).
 
I'm living and working in Canada and I have to obey Canadian regulation in this matter. I Googled about the crowdfunding regulations in Canada and it seems that only equity crowdfunding is regulated in Canada. Does it mean other types of crowdfunding are illegal and should be avoided?
 
On the other hand, I don't want to register a charity because the platform would be for-profit.
 
Can anyone please help me with my legal concern? Or can you please refer me to a person/center who can help me with answering my legal questions?

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