Ask HN: How to handle equity for small project with lots of cofounders?

This was Joel Spolsky suggestion. In the past.

https://gist.github.com/isaacsanders/1653078

Run. Seriously. Here's why:

You are running a business, or at least trying to. Ruling by consensus doesn't work, eventually. And that's when shit will start hitting the fan.

The work you've done isn't nearly as i.lortant as the work you'll have to do. It's unclear if you have the right skill sets to get to the next level now. And the skill sets you may or may not have, but will need, are worth way more than the nth developer. And if you all don't see why building to support 3 channels first, when you don't have customer validation is a problem, you don't have the right skill sets

If you are all friends now, you won't be soon; no matter what path you choose.

My advice, find someone who has the experience with running early stage startups and figure out what terms they would need to step in. That should give you an idea of a reasonable way to structure the deal.

Some things to note, the CEO is timely responsible and that's worth way more than each incremental dev, in terms of equity.

Profit-sharing is a great idea. But, it doesn't have to be tied to equity per se.

Figure out if you are all serious about turning it I to a start-up or just having fun coding. Then, go from there.

That's a very big team. It gets complex past 3-4 people.

I wouldn't split it by hours worked because it screws over the most effective people. Some parts of the code are harder than others. I would argue that Android is more work than iOS and yet you have three on iOS and two on Android, meaning the iOS guys are lifting a little less. The web portal guy could be doing most of the heavy work, especially if he's doing back end too.

There's also sales. Sales is painful if it's B2B and yet possibly the most important role in a tech heavy team.

With a team that size you also need someone who is handling the non-deep tedious stuff - company registration, dealing with partners, investors, project management, filling forms.

And you definitely need a product manager, a visionary who has high level view and makes sure everyone is on the same page. This can be the CEO too.

The CEO doesn't necessarily need a larger share.

I would honestly just split equity up equally. Extra results will go in the form of bonuses and salary. You probably have to assign someone as the mediator for this, but this can be done democratically too. Maybe even write up some contract to agree on how bonuses are paid out.

Unless any of you have done work that is not proportional to the others (for more, or for less) I believe that everybody should get the same amount of equity.

The leaving problem is easily fixed by adding a vesting period where no one would be actual owners of their part before N months/years.

Payment should be also equal. Otherwise, at some point resentment is going to build and things might get weird and start to fall off (I speak from experience). If one person adds more money at the start of the company they should be repaid (reimbursed) as soon as there is company money. Unless, once again, it is a disproportional amount of money. If that's the case some other arrangement (maybe more equity?) should be made.

Leave the unequal payment thing for when (and if) things go really well and the company actually has profits to distribute. At the beginning, everybody gets paid the same as salary and it's also all or nothing. Unless all involved get paid, no one gets paid.

When it comes to deciding who calls the shots I believe it doesn't really matter unless there is someone who clearly is a better fit for it. Also, being the CEO or giving directions to others doesn't mean someone is more important than the others. It just means that it is a different role.

My last bit of advice is about all the other things you guys didn't think about. Especially when it comes to things that can go bad. I would leverage the fact that this is the beginning and everybody is committed and excited and use this time to think about what to do when bad times come (they will). You should never get into a contract without knowing how to leave it. Find a shareholder agreement and use it as a base to come up with your own rules and agreements.