HACKER Q&A
📣 _pygv

What is a good equity split in my case


Albert starts hacking on a prototype project on june 2018. He works full-time on it. In march 2020, the project looks promising (made ~3000 usd) and he convinces Bob, a random guy he met on reddit, to join him. With the help of Bob, things take off. They invest 40k of their own savings in the project. From march to december 2020, average growth is about 100% per month. In July, Carl joins the project. In January 2021, growth slows down to about 30% per month, and total profit is 20M. In march 2021, Dan joins the project.

All of Albert, Bob, Carl and Dan work full time and plan to continue working for a long time on the project and consider themselves cofounders.

The project is a proprietary trading algorithm whose future profits are uncertain depending on competition and market conditions. Their plan is to scale up as a proprietary trading firm.

What would be a fair equity split between A, B, C, and D ?

  👤 uberman Accepted Answer ✓
What do Carl and Dan have at risk? It looks like the first two who have 40k of their own money at risk should have the lion's share.

My best guess is 50 35 10 5. Maybe 51 41 4 4. Something in that range.

It could be radically different though is we knew more about what each person had at risk. For example, are any taking less or no salary?

👤 nnext
It depends on whose skill set in most valuable in terms of business growth. The value of each founder depends on company stage. Technical generalist tend to be more valuable at the beginning of a company’s lifetime since they can hack together a minimum viable product. As the company matures, a stable hand who is able to make sure the product doesn’t go down is probably more stable. Based on the information your provided it would be hard to tell what your individual skills are and consequently what you bring to the table.
👤 NonEUCitizen
Why would they bring on Dan in March 2021 as a cofounder instead of as an employee?
👤 chovybizzass
100% to founder who built the product.