Ask HN: How do we split ownership of a startup between cofounders?

[yohann305]

We are three engineers who decided to work together on an idea of mine. Initially, the idea was to split (rather naively) the eventual company between the three of us equally.

Forward a month later and here we are. I have pulled about 70% of the work, another engineer 25% and the third engineer a "generous" 5%.

Yesterday, he asked me to put everything on paper to see if he would move forward with the project. In terms of interest, all three of us are pumped. We all love the idea.

At this point, I really need your help and advice. I want this to succeed and be fair. How should we proceed?

Note: None of us have any experience incorporating a business.

[vitovito]

I recently helped some friends design the bylaws and rules of order for their new startup. None of the founders are working on it full-time, and the goal was to ensure longevity and fairness despite this.

All founders are to receive an equal profit share, and equal ownership, period. (Project governance is separate from company governance, and share ownership is separate from profit sharing percentage. If you quit, you might keep some of your shares, but only current employees share in profits.)

Effort isn't classified by raw hours worked. You're not farmers, tilling in a field, where the more time you spend the more crops you plant. You're white collar creative class and information workers, where one engineer may write 10x the LOC as the other two, but have absolutely no business skills, social skills, or common sense. Your MBA founder may be utterly useless until it comes time to get up in front of an audience and convince them to write you a check. Your designer founder might be idle 9/10 of the time because it takes you that long to implement their research and work. If they're your cofounders and not just your friends, then you picked them for a reason, and they will provide value.

When profit sharing is the only way to get earnings, it aligns your interest better with the company's. You have to help the company earn more money if you want to personally earn more money.

See this old advice from game industry mentor Dave Taylor: http://slashdot.org/comments.pl?sid=57975&cid=5575246 and this Joel Spolsky answer: http://answers.onstartups.com/questions/6949/forming-a-new-s...

[tejay]

In my opinion, if you have cofounders, you should split the equity evenly. If you are uncomfortable splitting ownership evenly because you don't think your cofounders will work hard enough in the future, you probably shouldn't start a company with them.

If you're concerned about fairly valuing the work put in until now, a month's work, even if you had done 100% of it yourself to date, is a small, small portion of the total work required to get to cruising altitude. This is a multi-year journey, after all.