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In this conversation, Mike discusses the critical importance of having open and honest discussions about equity distribution among co-founders when starting a business. He emphasises that while many assume a 50-50 split, this often leads to complications later on. Drawing inspiration from the book 'Slicing the Pie', he outlines a structured approach to fairly allocate equity based on contributions such as cash, time, resources, and intellectual property. By tracking these contributions and applying multipliers based on scarcity, co-founders can engage in meaningful discussions about equity that foster trust and transparency, ultimately leading to healthier business relationships.
Takeaways
- Equity discussions should happen early to avoid complications later.
- Assuming a 50-50 split can lead to resentment and conflict.
- Using a structured approach helps in fair equity distribution.
- Tracking contributions is essential for transparent discussions.
- Multipliers can reflect the scarcity of contributions.
- Difficult conversations are necessary for building trust.
- A Google sheet can simplify tracking contributions.
- Equity discussions should be based on data, not emotions.
- Building a high-trust relationship involves open communication.
- Avoiding difficult conversations can harm future partnerships.
Chapters
00:00
The Importance of Equity Discussions
02:11
Mechanisms for Fair Equity Distribution
06:46
Tracking Contributions and Future Discussions
11:03
Building Trust Through Transparency
Here is the book reference: https://slicingpie.com/book/
Find out more about working with me. mike@smbmastery.com.au or https://www.linkedin.com/in/mikeadamscott/
