About fair multi-party compensation in early-stage projects
If you’ve ever been involved in a startup that’s bootstrapping, whether you’re a founder, a collaborator, or an investor, you know problems can and will arise from determining the equity split. A venture’s projected success is likely the only semblance of compensation you can hope for; and unless the project is non-profit, you’re better off reaching an agreement with your colleagues on equity-split rules from the very start. Typically, splits often end up looking something like: 50% for Person A (who had the idea), 25% for Person B (who can sell the product), and 25% for Person C (who will build the product).
The Problem
People can have all the best intentions in the world. You and your friends can kick-start a startup with a pre-negotiated fixed equity split based on forecasts of future growth. However, life happens (“I’m a dad [or a mom] now,” “I need cash,” “I’ve found a better project,” and so on) and situations evolve (our startup needs to relocate, new people join and leave, etc.). These are all issues to manage. But for an equity-split to stay fair, all involved parties should adjust the initial agreement according to each change, which can lead to:
- Inertia
- Wasting time
- Negotiations that can possibly degenerate into conflicts
A Solution
What if you and your friends had at your disposal an equity-sharing framework, sufficiently flexible and fair, which would help you to avoid endless discussions and frequent changes? What if you had an automated dynamic distribution of equity across time following your own pre-defined rules about contributions and value-creation (time, money, relationships, equipment, supplies, etc.)? How great would that be?
Well, there actually already is a tool that can be of great help on this matter, or at least a good starting point for inspiration: “Slicing Pie” by Mike Moyer, the creator of an entire system based on a dynamic equity split strategy — the Grunt Fund. At Quidli, we LOVE the idea of a trustless framework to simplify and guarantee fair valuations on everyone’s contributions. By applying “Slicing Pie,” a startup shifts from an unproductively competitive state of mind to a more cooperative mindset that encourages contributions and better serves its greater interests.
The “Slicing Pie” model and book are tremendous influences on the work we’re doing at Quidli today. We’re believers in the power of the Grunt Fund, and our aim is to build on it via blockchain to resolve the legal, financial, and time challenges that still exist. Only then can we really start reworking how work is done in organizations today.
And in the mean time, I highly recommend taking a look at “Slicing Pie.” It’s absolutely a must for any early-stage startup. Happy reading!
Let’s rework work together. Follow us to learn more about fair equity splits, equity-for-labor, blockchain protocols, and to stay updated on Quidli’s progress.
