I have been working on a new business idea these days with my colleague and a potential investor. We are making market research, business plans, and financial projections.
One of the things that we need to still agree on is the distribution of the shares. Normally, when you are a new entrepreneur (like we were some time ago), you go with a 50-50 distribution, and that’s it. In the past, this worked for me because my partner and I just put equal amounts of effort and money into our previous company.
Now it’s pretty much the same, but we want to onboard a new member. What to do? Go 33-33-33? Makes sense to keep things simple, but we know now it will not work. We are not complaining about each other’s commitment. It is that we are mature entrepreneurs now, and business is business. So I have been struggling to clearly and fairly distribute the initial shares, and I found something very insightful: The Founder’s Pie Calculator.
The Founder’s Pie Calculator was created by Frank Demmler, who is an Adjunct Teaching Professor of Entrepreneurship at Carnegie Mellon University.
It aims to distribute the initial shares stakes between founders in a better and more fair way. The method uses a table for calculating the stakes according to the weight that each founder “deserves” concerning: idea, business plan, domain expertise, commitment & risk, and responsibilities.
I found it very useful for my use case, so I decided to create my own Google sheet to play with the idea and present it to my colleagues. I think this is a powerful tool and can be improved, but for sure, it offers a better approach than the typical 50-50.
Feel free to review The Founder’s Pie Calculator, make a copy, and play with it.
I will be happy to hear feedback about how it works for you!