Startup Equity Calculator: How to Divide Up Startup Equity

Learn to split the founders equity pie with the ultimate calculator for smart and fair pie splitting for startups.
4.8 (87 ratings) Instead of using a simple lifetime average, Udemy calculates a
course's star rating by considering a number of different factors
such as the number of ratings, the age of ratings, and the
likelihood of fraudulent ratings.
4,476 students enrolled
Instructed by Symon He Business / Entrepreneurship
$165
Take This Course
  • Lectures 40
  • Contents Video: 4 hours
    Other: 0 mins
  • Skill Level All Levels
  • Languages English
  • Includes Lifetime access
    30 day money back guarantee!
    Available on iOS and Android
    Certificate of Completion
Wishlisted Wishlist

How taking a course works

Discover

Find online courses made by experts from around the world.

Learn

Take your courses with you and learn anywhere, anytime.

Master

Learn and practice real-world skills and achieve your goals.

About This Course

Published 11/2012 English

Course Description

So, you have a great business idea.

You grab your two best friends, get all excited, and then start a company together.

In your haste to get started, you and your two cofounders decided to divide the equity evenly in thirds--it seemed the obvious and fair choice then.

Two months later, just as you're starting to get some traction, one of the "friends" changes his mind and drops out entirely. But for the work that he did, he believes he should still keep his 1/3 share of the company.

The two of you left are now essentially doing all the work, but for only 2/3 of the company. Still worth pursuing? Maybe. But you definitely won't be happy.

With 'deadweight' cofounders with significant equity stakes, you'll be lucky if you could attract any new team members or investors.

Don't make this dumb mistake. My course and my calculator will allow you and your cofounders to have a collaborative and transparent conversation how much of the company each person should get.

_____________________________________________

Look, starting a new venture is hard enough, but having to figure out what is fair for each cofounder shouldn't be the hardest thing.

By taking this course and using my easy to use startup equity calculator, you'll learn some ways on how to avoid this unfortunate, yet preventable situation. And you and your team might even have fun with the pie slicing exercise!

Through the course, you'll learn what you should into your equity pie considerations and how to use a systematic approach for calculating each founders fair share, collaboratively and openly.

While this course isn't intended to provide you with the THE "correct solution", it will give you and your team a great starting point.

And it'll make easy an often awkward conversation about who should get how much and why.

Deciding and agreeing on how to divide the initial equity pie is no trivial task, but this tool will definitely help get the conversation going on the right path by forcing you and your cofounders to decide on what are the key milestones for your venture and how each of you are going to be making your contributions.

What if your starting a more traditional business?

Whether you're going for a high growth type of startup or a more traditional startup with known benchmarks for revenue and cash flow, I've got you covered.

I'll explain to you which of the TWO frameworks and tools you should use depending on the type of venture you're starting up.

Take a look at the preview lectures to check out the calculators in action and you'll see how they can help you and your cofounders with having a smart and equity conversation about splitting the pie.

Good luck and happy slicing!

_____________________________________________________

Also, I personally respond to EVERY question or discussion post.



What are the requirements?

  • Microsoft Excel 2003+
  • Good grasp of percentages will help!

What am I going to get from this course?

  • Understand the key factors in initial equity consideration
  • How to use milestones and actual contributions to calculate a founder's equity
  • Understand the two different frameworks for splitting the pie
  • Learn which framework is better suited for your startup
  • Use my carefully designed calculators to start slicing the pie

What is the target audience?

  • new business owners
  • start ups
  • founders
  • entrepreneurs

What you get with this course?

Not for you? No problem.
30 day money back guarantee.

Forever yours.
Lifetime access.

Learn on the go.
Desktop, iOS and Android.

Get rewarded.
Certificate of completion.

Curriculum

Section 1: Too Long Didn't Watch!
08:29

This is the TLDW (Too Long Didn't Watch) Summary Lecture.  

Section 2: Why a Founder's Pie Calculator?
01:01

What this course WILL and WILL NOT do for you.

01:43

Whatever you do, DON'T divide by N. It's almost certainly going to be the wrong approach for you and your team.

00:48

Course objectives

00:47

Where are you from? What kind of startup are you working on or will be working?

03:38

The calculator in this course is inspired by an article by Frank Demmler, which you can find here:

https://www.andrew.cmu.edu/user/fd0n/35%20Founders'%20Pie%20Calculator.htm

For the model in this course, I've made some additions that allow it to take on more use cases.

04:21

Introduction to the Waterfall Framework

01:37

Tech, venture funding, IPO, apps, etc...? Go with the Founder's Pie Calculator.

Traditional brick & mortar startup? Go with the Waterfall Framework.

Section 3: Framework #1: Founders Pie Calculator Considerations
00:43

Overview of the section.

03:25

Should the idea be worth something? How much? Find out.

02:51

How to treat cash contributions.

02:10

Discussion on skills for the founders pie calculator.

01:07

A list of common contributions teams may want to consider as part of their equity pie slicing exercise.

01:38

Milestones and how they're used in the founders pie calculator.

02:40

Discussion on vesting--don't use the calculator for that.

Article

An updated founder's pie model--same functionality but better usability.

16:13

A quick walk through of the founder's pie calculator and how to use it.

14:48

A walk through of the founder's pie calculator with a tech startup example involving 3 founders.

09:10

A walk through of the founder's pie calculator with a tech startup example where we use two of the "cofounder" slots to track angel investors and a 1st hire instead.

Section 4: Framework #2: Waterfall Model
01:23

If distributions of cash flows are expected and there's a need to reward sweat equity, then the waterfall is a great fit.

Article

Download the waterfall framework file, with all of the formulas. You will be using this for the rest of this section.

11:52

Discussion on what is the waterfall and its components.

12:05

Walk through of the waterfall model and how to use it.

15:22

Restaurant example using waterfall framework.

Section 5: Measures of Return for Waterfall
02:20

The lectures in this section were originally geared towards real estate but the concepts apply to any business with cash flows out and cash flows in (i.e. traditional business startups).

02:16

Quick overview of the topics to be covered in this section.

02:24

If you aren't comfortable with discounted cash flow, it'll be difficult to fully utilize the waterfall model.

15:12

The Net Present Value determines value of all future incoming and outgoing cash flows in today's dollars.

In this lecture you will learn about NPV and what this measure says about your project.

**Model Included

12:20
Weighted Average Cost of Capital is used to calculate the cost to make an investment if you are deriving your funds from outside sources.
03:14

Terminal Value is an effective way to calculate the value of a perpetual stream of cash flow.

13:22
The Internal Rate of Return measures and compares the efficiency of your investment taking into account the timing of the cash flows.
01:14

The Cash Multiple measures and compares the magnitude of your investment without taking time into consideration.

06:38

With many ways to measure your returns, which measure should you use? When one is low and another is high, what does that mean?

**Model Included

Section 6: Additional Waterfall Example & Explanation
01:10

Watch this before you jump into the rest of the section.

08:31

Using the same scenario (a real estate investment) to evaluate and compare the results of 4 different waterfall scenarios.


DOWNLOAD the file here to follow along for the rest of this section.

04:30

Using the same example to compare the various waterfall structures, we explore what the returns for each party would look like in a no waterfall scenario.

12:00
Using the same example to compare the various waterfall structures, we explore what the returns for each party would look like in a 2 tier waterfall scenario.
09:31

Using the same example to compare the various waterfall structures, we explore what the returns for each party would look like in a 3 tier waterfall scenario.

08:05

Using the same example to compare the various waterfall structures, we explore what the returns for each party would look like in a 4 tier waterfall scenario that uses a catchup.

06:30

Comparing the four waterfall scenarios shows that depending on what your role is and what your expectation for the overall venture return will be, the ideal waterfall could be different.

Students Who Viewed This Course Also Viewed

  • Loading
  • Loading
  • Loading

Instructor Biography

Symon He, Real Estate Expert | Stanford MBA | Business Coach

Symon is a real estate investor, licensed broker and consultant based out of Los Angeles CA.

He currently helps high net worth investors and private real estate funds locate and analyze both residential and commercial investment real estate in CA, TX, CO, AZ, and NV.

Previously, he led acquisitions efforts on over $400M in commercial real estate investments at a private equity real estate fund.

Symon also a cofounder of LearnAirbnb, a consultancy and research group specializing in the home-sharing economy.  

Symon graduated Magna Cum Laude in Computer Engineering and Economics from UC Irvine and hold an MBA from Stanford University.

(I'm older than I look!)

Ready to start learning?
Take This Course