How to Avoid Fistfights with Co-Founders: Founder Equity Split Suggestions

Fistfights with Co-Founders can be avoided!  Here are some tips for founding your company with partners, such that later on, when things get complicated (like founders quitting, etc.), ya'll don't kill each other.   Nothing feels more frustrating than a founder that quits, and takes a bunch of stock with him....  A big benefit of this method is also: many VCs will prefer this type of structure (vesting)!  And.. the IRS might prefer it too... so, here goes!

1. First, decide who is bringing "value" to the company at this point... (like who is bringing 'the idea', or 'some tech', or contributing 'some gear', or contributing 'some money').  If nobody is bringing anything, skip to step 3.
2. Set aside 10-30% of stock to give to people who 'brought something' to the team...   Rule of thumb: 5% for money or stuff, 10% for tech, 20% for idea.
3. Now take the remainder (90-70%) and set that aside to distribute evenly to the whole team for "work on the business plan prior to formation".
4. Okay, now assign the remainder amount evenly with all founders (example 7 founders, 70% means 10% per founder).
5. Next assign the 'brought something' extra stock to the given founders (example idea will have 30%, tech guy has 20%, and the rest have 10%).
6. Agree on a vesting term (3 year, monthly vesting is common).
7. Now, write a VERY short Memorandum of understanding with everyone's name, the date, signature places, and most importantly the vesting terms.
8. Pick a CEO!  (the 1 person who shall be the CEO and in the drivers seat!  All other roles could be identified too, but the CEO role is a must.).  It does not have to be the idea guys, but it's nice if it is.

Here's an example Memorandum (note: I'm not a lawyer, and this wasn't written by one: use at your own discretion).  (names are made up, except mine)

Memorandum of Understanding

We, who plan to found company ______ each agree that when this founding occurs we will split the shares of the company as follows:
   Joe Smith:  30%, Whom we agree shall be the CEO of the company.
   Frank Toe:  20%
   Alan Man:   10%
   Harlan Beverly: 10%
   Sally Jenson: 10%
   Erin Klause: 10%
   Jessica Stower: 10%

We agree that these shares should have a vesting period of 3 years, whereby vesting happens evenly, monthly, over a period of 3 years.  the company shall have the right to any stock not vested in the event that any founder leaves the company (voluntarily or involuntarily).  We, agree that this vesting shall begin on this day ________.

Signed,
______________________________, Date ______________
______________________________, Date ______________
______________________________, Date ______________
______________________________, Date ______________
______________________________, Date ______________
______________________________, Date ______________
______________________________, Date ______________

That's about it!

Now, get it done right, so that you don't have to fight!

Later on, when you actually found the company (as in incorporate), this document will go away... and be replaced with real shareholders agreements and so forth.

Great Products Need Little Marketing

Do truly great products need a lot of advertising help? Will lots of advertising expense overcome a bad product?  I intend to find out, at least in one vertical: video games.

The presentation below is a presentation I gave which outlines my research goal and motivation around how products succeed in the marketplace.  Specifically Product Conception Quality, or how well a product is conceived during the Fuzzy Front End of product development, is a moderator on product success controlling for advertising expenditure.

What do you think will be the answer of my research?   Will products that were better conceived perform better in the marketplace when we control for ad spend?  Or is it purely a factor of how hard companies 'push' their bad products?

Do you have a Purple Cow?  Or are you shoving a Normal Cow down peoples throats?

Great Products Need Little Advertising: New Product Development from Harlan Beverly

Engaging Social Posts that Don't Suck

Social Posts onto Facebook and Twitter are important for companies... they serve many purposes, but first and foremost of those purposes should be ENGAGEMENT.

What the heck is engagement?  This picture should tell the story.. or click it or the presentation below to learn more.   Engagement, as you can see, leads to success... which is what Business is supposed to be about.

So, how do you write engaging posts on Facebook, Twitter, Pinterest, and so forth, without them sucking?
Well I've put together a little training presentation on just that.

Enjoy!  Comments welcome!

How to Write Good Copy or Social Network Posts from Harlan Beverly