Presumably he's referring to the plethora of comments below from accounts created within the last hour whose only comment is a one or two word praise for this submission.
It smells of sock-puppetry, but odd considering this is exactly the submission that would appeal to this audience.
I suspect more meatpupptetry, as in promoting on twitter/facebook and asking friends and followers to come and leave feedback and vote up the submission. Nothing wrong with that, really.
Thread upvotes from new accounts shouldn't count at all or should be significantly reduced in value to prevent this. Stories should be upvoted because they're interesting and relevant, not because the submitter has a social network upon which to draw.
>Stories should be upvoted because they're interesting and relevant, not because the submitter has a social network upon which to draw.
That's only a concern if you consider yourself an HN'er first and entrepreneur second. If your goal in submitting is to provide high-quality material for HN, then you wouldn't use meatpuppetry. If, on the other hand, your goal is to drive traffic and you don't care about HN, then you use whatever means you can. It's the same for people who spam craigslist trying to get users. They're polluting craigslist and lowering it's quality, but they care about traffic, not craigslist. If it's acceptable to do that (and most startups do), then it's acceptable to game HN.
The quality of comments on HN seems to be falling pretty quickly.
It's a good idea. I think technical founders are probably a little underrated in your model.
Otherwise, I don't know if equity calculators are a great solution in general. They just tend to shift the problem from the importance startuppers give to different topics to the importance a program gives to these topics. On top of that, discussing non-round amounts >10% (such as 19%, 23%, etc.) just gives much too much importance to a few %, which paradoxically makes discussions tougher down the road. Better to round things up (70/20/10, 60/40) and just leave things at that.
I didn't implement rounding in the first version for a very simple reason: in the case of 3 equal founders, the answer should be 33.33/33.33/33.33. So rounding to the nearest 5 or 10 is wrong. If anyone has a quick algorithm that will provide "smart rounding" following fractions, I'm interested. Otherwise, I'll figure it out.
Is it really necessary to allocate less than 100% of initial shares when future rounds of funding and option grants can be handled by diluting the existing shares?
It's not meant to say "who shows up and sits in the back of the room while the CEO talks 90% of the time". In my experience, there is one lead person who does fundraising, by contacting investors, setting up meetings, preparing the slides, etc. The question could be clearer. Should I change it?
>> In my experience, there is one lead person who does fundraising, by contacting investors, setting up meetings, preparing the slides, etc
That's not my experience at all. Almost all the pitches that I've been involved with (either giving, hearing, or advising) have had 2 people trading back and forth with the dialog.
And contacting, setting up meetings, etc is often more than one person.
This was very interesting. I ran a simulation based on a proto-startup I am involved with, and the suggestion at the end "maybe X should be CEO" was right along the lines of what I was thinking.
But I also saw that it is quite easy to game. On the other hand, so are real equity discussions.
Curious to hear what experienced entrepreneurs think about this tool, and the estimates it gives.
I've been talking to two developers about joining a bootstrapped startup I've been working on... I'm full-time, MVP is 80% of the way, and its in a space where I have domain expertise, industry connections, and fundraising contacts.
Anyway, long story short, it was spot on with respect to the split between me and 1 technical co-founder, but sort of missed fact that there's diminishing return for adding a second somewhat overlapping person.
Also, it doesn't handle the case where different people are working in different proportions (some full-time, some heavy part-time, some light part-time). Would be useful to have the ability to create a timeline to reflect how many hours per week people will be working and when they would go full-time. If you really wanted to go nuts, you could add in some modeling to account for people who may work way below their market value, and how long that would go on for.
I have been running my startup for a little over 2 years now (bootstrapped). After inputting my constraints/situation to the simulation, it was pretty much spot on. I definitely wouldn't argue with what the numbers showed up as :)
I found this a pretty interesting and useful way to look at this.
One additional factor I would love to see: situations where one person is coming on a "late" cofounder (e.g. a basic product has already been made, e.g. with outsourced Eastern European developers, and there is some minor traction).
I actually came into this situation with my current startup. My partner had the MVP built by contractors before I came on. He is completely BD/sales, but he had a close advisor who helped him get the product built.
Honestly, this is kind of a nuanced situation. First of all, it depends how long the first guy has been working on the project, and whether he was doing it full-time or on the side. Also, it depends on whether the MVP has product/market fit, or whether it needs to pivot and be re-built before it is really what the customers want.
Overall, without knowing what weights this "calculator" assigns to various variables, it is pretty much useless. Also, as much as technical founders want a formula for everything, equity split comes down to a negotiation (especially if founders come on at different times).
I tried filling this out based on a situation I was in earlier this year (never got off the ground, etc) but basically it came down to:
Me (only technical person, responsible for implementing core product, not familiar with industry space): 27%
Co-Founder 1 (main "business guy," came up with the idea, had lots of connections to angel investors, would be staying at his current job): 49%
Co-Founder 2 (second "business guy," lots of operational experience in industry): 23%
Co-Founder 3 (not really a co-founder, someone that helped us with some legal and accounting tasks and who expressed an interest in joining as employee #1 if we got any traction): 1%
I think it's great the way the rule of 72 is great: awesome for a quick sanity check, terrible to become the sole input. I'm pretty sure that's exactly what you were going for; great!
Thanks, you are of course correct. No one in their right mind would blindly say "the calculator says you should get 23% of equity, that's what you'll get".
Rather, it's a way to start asking questions among founders: "how come, if I use this calculator, John gets so much? I thought he wasn't that important, let me try to understand what is going on."
This doesn't take into account much in the way of risk. Really, those that take the most financial and legal risk (e.g. if the company goes under, who's on the line), should have significant impact on equity. Part-time vs. full-time does cover some risk.
This is probably the first "built over the weekend" project that I've seen here that I actually believe the person built it over the weekend. :) Looks nice.
I've done about 4 startups now - and always chosen to split the equity evenly between the founders, despite the fact a tool like this one would have suggested I would have been 'worth' more than parity.
What this tool forgets is that a startup is a tough emotional journey and an emotional roller-coaster. In every startup's life there are moments of dispair, moments when it will all seem like too much effort. The ability to come through these as a team is as, or arguably more, important as being a brilliant coder, or someone having great contacts. In order to get that team spirit and togetherness that is key to the company being successful, I think it is better to split the equity more evenly.
Or - to put it another way - in most cases, founders shares end up being worth almost nothing (statistically most startups never get a proper exit). It's far more important to look at what will increase the chance of that exit, rather than how much you will own at exit.
That's the thing, the only time I feel like founders should get a different distribution of equity is if one of the founders is paying salaries, paying for hosting, paying for business cards &c...
That's how we are doing it at my company - my cofounder had the money and wanted to bootstrap, I was okay with that (I figure my cut will be worth more if we bootstrap instead of go 50/50 and find VC) so my cofounder is paying for everything including a "median" salary for me; we've done our split 20/80.
As far as the other vectors go, I feel like they shouldn't matter - all the cofounders have a role and everyone should be working equally hard!! My test of the app assuming none of the cofounders were paying for everything put the split (for two of us) at 58/42. Which is silly because my cofounder may be the reason why we have customers and is also a key player in the industry - but there would be no app, no features, and it wouldn't be working as well as it would if an outsourced rent a coder had done the work.
Just tested it out and it's pretty cool. Obviously not a be all end all, but tested out some situations I'm in and some which my friends are in, and it gets pretty close for my examples of teams of 2-4.
I dont agree with this calculator, you should provide references, research, concepts, reasoning. I cant fathom someone using this seriously, plus the fake accounts is a little lame for a HN post.
My 0.02€ - can it include a way of proportioning "work to date" - ie let's say the startup has been incubating for 2 years, and it's now found 2 co-founders... How do I model that ?
I will, but I was first looking for some feedback on scenarios, see how far I can take this before explaining how it's done. Think of it as a double-blind experiment: if I told you today how it's computed, you would object to it, without trying it out. If you first try it and think it gives decent results, then you'll be more open to discuss the internals.
Do you want to change individual weighting for the questions, or rather specify at the beginning something like "this startup is in the B2B space, therefore sales will be the major challenge", or "R&D will be critical", etc... I don't see how you could weight questions, but you could weight high-level sectors. Does that make sense?
Ultimately, as a geek, I want to see what makes the thing tick, and think about how that may or may not relate to my situation. Also, unless you have access to statistics that most people don't, your numbers may simply not be any more accurate than our own estimates.
Making it spit out a google spreadsheet or something would be a neat trick.
