14 Apr

OnStartups – Forming a new software startup, how do I allocate ownership fairly?

For many companies, each "layer" will be approximately one year long. By the time your company is big enough to sell to Google or go public or whatever, you probably have about 6 layers: the founders and roughly five layers of employees. Each successive layer is larger. There might be two founders, five early employees in layer 2, 25 employees in layer 3, and 200 employees in layer 4. The later layers took less risk.

OK, now here’s how you use that information:

The founders should end up with about 50% of the company, total. Each of the next five layers should end up with about 10% of the company, split equally among everyone in the layer.

via OnStartups – Forming a new software startup, how do I allocate ownership fairly?. Perfect and beautiful answer to an incredibly hard problem.