@GruntFunds
Slicing Pie is a Universal, One-Size-Fits-All Solution
for the Allocation and Recovery of Equity in an
Early-Stage, BootstrappedStartup.
Fun along the wayBIG
PAYOUTHARD WORK
@GruntFunds
Why startups start…
Fun along the way ?HARD WORK
@GruntFunds
Success Criteria 1. Change the world2. Lots of money3. I get my fair share
@GruntFunds
Fair=Fun
@GruntFunds
Your Share % =The Value of Your Contribution
The Total Value
Perfectly Fair Equity Calculation:
@GruntFunds
So…
Value creation estimates
Rule of thumb
Financial projections
Industry standards
Lawyers, advisors, professors
Girlfriend, boyfriend
Mom, dad, rich uncle
Darts
Fixed Equity Split
67% split equity at the outset of the venture
* Wasserman/Hellman@GruntFunds
“60/40”“51/49”
“25/30/45”
@GruntFunds
But…
Value creation estimates
Rule of thumb
Financial projections
Industry standards
Lawyers, advisors, professors
Girlfriend, boyfriend
Mom, dad, rich uncle
Darts
“50/50”“33.3/33.3/33.3”“25/25/25/25”
90%+ of startups do equal splits
@GruntFunds
Let’s keep it simple…
You do all the work?
You bring in another guy?
Your partner wants to quit?
1,000,000 other things?
But, what if…
You want to quit?
Your CTO gets hit by a bus?
@GruntFunds
Your Share % >The Value of Your Contribution
The Total Value
Your Share % <The Value of Your Contribution
The Total Value
@GruntFunds
Alligator Pit
@GruntFunds
Not Fair=
Not Fun@GruntFunds
What We Need
• Perfectly fair
• Rewards contributions
• Provides motivation
• Accommodates team changes
• Flexible in the face of rapid change
• Gets rid of the gators!
@GruntFunds
Dynamic Equity Split
@GruntFunds
You Contribute 50% = You Get 50%You Contribute 10% = You Get 10%
You Contribute 23.2% = You Get 23.2%
No more and no less
@GruntFunds
A person’s % share of the rewards should equal that person’s % share
of what’s at risk.
@GruntFunds
FairMarketValue
@GruntFunds
1.Allocation Framework2.Recovery Framework
@GruntFunds
Allocation Framework
1. Convert contributions to Slices
2.
1. Allow it to self adjust over time (dynamic)
Your Share % =Your Slices
Total Slices
@GruntFunds
Convert to Slices
Non Cash Cash
@GruntFunds
Convert to Slices
Non Cash Cash
FAIRMARKETVALUE
FAIRMARKETVALUE
@GruntFunds
Convert to Slices
Non Cash Cash
FAIRMARKETVALUE
x2
FAIRMARKETVALUE
x4@GruntFunds
Time
Fair Market Salary*
-
Cash Compensation
X
2
Grunt Hourly Resource Rate (GHRR!)
@GruntFunds * Hourly @ 2,000 Hours/Year
Time
$50/hour*
X
2
=
Grunt Hourly Resource Rate (GHRR!)
100 slices/hr
@GruntFunds * $100,000 per year
Time
$50/hour* - $10/hour paid in cash
=
$40/hour at-risk
X
2
=
Grunt Hourly Resource Rate (GHRR!)
80 slices/hr
@GruntFunds * $100,000 per year
Small Money
Cash Amount
X
4
(Investments Convert When Spent)
@GruntFunds
Equipment
• New = Purchase price x 4 (cash)
• Less than a year old = Purchase price x 2 (non-cash)
• Older than a year = Book value x 2 (non-cash)
@GruntFunds
Everything Can Convert
• Unpaid Commission x 2
• Unpaid Royalty x 2
• Unreimbursed Expense x 4
@GruntFunds
Grunt Funds in Action
@GruntFunds
Grunts Contribute Different Things
Grunt 2Grunt 1Grunt 3
Jr. Developer Founder Rich Uncle
Convert to Slices
Grunt 2Grunt 1Grunt 3
Jr. Developer Founder Rich Uncle
Add ‘Em Up!
Grunt 1’s Share
÷
Grunt 2’s Share
÷
Grunt 3’s Share
÷
Sales Guy
Grunt 4
Sales Guy
Grunt 4
Grunt 1’s Share*
÷
*If the Grunt Does Nothing Else
Grunt 2’s Share*
÷
*If the Grunt Does Nothing Else
Grunt 3’s Share*
÷
*If the Grunt Does Nothing Else
Grunt 4’s Share
÷
Recovery Framework
@GruntFunds
Recovery Framework
Recovery
• No pie for non-cash
• No multiplier for cash or tangible property
• Buy back (if possible) at 1x cash contributions
• Non-compete
• Loyal employee protection
Removing a Grunt
• Keeps pie
• Buyback at Slices x $
• No non-compete
Grunt 4
Convert to Slices
Grunt 2Grunt 1Grunt 3
Jr. Developer Founder Rich Uncle
Grunt 4
Convert to Slices
Grunt 2Grunt 1Grunt 3
Jr. Developer Founder Rich Uncle
Removing Contributions
Grunt 2’s Share
÷
Grunt 3’s Share
÷
Grunt 4’s Share
÷
Freezing the Pie
Freezing the Pie
Freezing the Pie
• When you can just pay people!
– Revenues
– Series A investment
Time
$50/hour* - $0/hour paid in cash
=
$50/hour at-risk
X
2
=
Grunt Hourly Resource Rate (GHRR!)
100 slices/hr
@GruntFunds * $100,000 per year
Time
$50/hour* - $10/hour paid in cash
=
$40/hour at-risk
X
2
=
Grunt Hourly Resource Rate (GHRR!)
80 slices/hr
@GruntFunds * $100,000 per year
Time
$50/hour* - $20/hour paid in cash
=
$30/hour at-risk
X
2
=
Grunt Hourly Resource Rate (GHRR!)
60 slices/hr
@GruntFunds * $100,000 per year
Time
$50/hour* - $30/hour paid in cash
=
$20/hour at-risk
X
2
=
Grunt Hourly Resource Rate (GHRR!)
40 slices/hr
@GruntFunds * $100,000 per year
Time
$50/hour* - $40/hour paid in cash
=
$10/hour at-risk
X
2
=
Grunt Hourly Resource Rate (GHRR!)
20 slices/hr
@GruntFunds * $100,000 per year
Time
$50/hour* - $50/hour paid in cash
=
$0/hour at-risk
X
2
=
Grunt Hourly Resource Rate (GHRR!)
0 slices/hr
@GruntFunds * $100,000 per year
Freezing the Pie
@GruntFunds
Freezing the Pie
Profits orProceeds
Series A Investor
Negotiate $900,000 Pre Money
Raise $1,000,000
Series A Investor
$1,000,000 + $900,000 = $1,900,000
Series A Investor
$1,900,000 Post-Money
Freezing the Pie- Series A
Profits orProceeds
What We Got
• Perfectly fair
• Rewards contributions
• Provides motivation
• Accommodates team changes
• Flexible in the face of rapid change
• Gets rid of the gators!
@GruntFunds
Slicing PieResources
@GruntFunds
@GruntFunds
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