What is a reasonable percentage of a startup if it was my idea and I’m paying for everything?

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JASON LEMKIN

One way to approach the scenario of multiple co-founders but just one paying for everything is to create a second bucket of stock.

You divide up “founders” stock as appropriate – 1:1:1, or 2:1:1, or 3:2:1, or whatever is fair.

Then … whoever is putting up the cash also gets more equity based on a pre-money valuation for that super early money.  Say the pre-money is $500k, and the funding founder puts in $100k … she’d get an extra 17% of the company on a diluted basis ($100k/$600k total = 17%).

You see this a lot.  An “additional” 10%-20% of the fully-diluted cap table goes to the “funding founder” in common stock, or series seed stock, or whatever.

The only fair way I can think of to do this to pick an arbitrary but “fair” pre-money for the investment.

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Published on August 19, 2015
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