#3 How To Divide An Imaginary Pie
Alex decides that he can’t build the company by himself. There’s too much emotional turmoil, and too much work to get done. As one of the investors Alex is pitching says, “startups are a team sport.” Alex meets Matt Lieber, a former radio producer, MBA, and management consultant with Boston Consulting Group. Matt is excited by the business, writes Alex a business plan, and wants to be part of the company.
Before Alex and Matt can lock in their partnership, they need to discuss equity: how much of the company each of them will own. Alex starts by suggesting that Matt get 10%. Matt thinks 45% is fair. Day one of their negotiation ends without agreement.
That night, Matt thinks the partnership is dead, and Alex searches for guidance on how to reach an equity split. Advice is all over the map. For instance Fred Wilson, the venture capitalist and blogger, suggests that founders split 50/50. Elsewhere, an equity split calculator provides a more objective solution. In the end, Alex realizes there is no right answer, which is liberating. Finally Alex and Matt make a deal and become partners.