Splitting Equity is Easy without the Humans


Someone wrote me today:

I have taken a lot of time to ponder Rule #1 in your ‘Dividing Equity’, “Expect to be Disappointed”. I have also been diving into ‘Slicing Pie’ and talking to Mike Moyer about his ideologies as well. Similarly, I find the same disconnected energetic as he refers to everyone as “grunts”. I ask the question, why is it so difficult for humans to come together?

My answer:

For every other contract I negotiate and sign, the goal is a win-win.  99 times out of 100 I find terms to reach that goal.

The difference for splitting equity is that it has to be a zero-sum negotiation.  There is exactly 100% of the pie to split.  Anyone worthy of sitting around the table to split that pie has put in what they feel like is a lot of work.  Above and beyond the normal call of duty.  Thus everyone expects a nice size slice of that pie.

Add up those expectations and you almost always get a sum greater than 100%.  Hence the disappointment.  Hence the feeling of lose-lose.
The only time you don’t get that is when two founders just go halfsies or three founders go thirdzies.  More often than not, that just puts off the lose-lose discussion until later are rarely are partnership so evenly split by talent, experiences, and effort.

If it were a real, edible, pie, then we could just use the I-cut-you-choose method to split it.  But try that method a dozen times with people who really like pie, and you’ll see it too leads to quite a lot of disappointment participants.  The difference is that the stakes feel a lot lower.  We talk about shares like they are pie, but pie is just pie, not wealth.

Ten minutes later pie the pie is gone.  Those shares are going to be around for years.

By "Luni"


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