Is div. possible mathematically, by working the weight of each contribution say example finance will weight - 50%, technical expertise - 25%., operations -25 % etc
1. land partners : land Owners providing Land - 25% weightage
2. People moving on initially and starting the processes at ground level , physically staying on site, Managing early day to day business. Setting up infrastructure at remote sites - 20 % weigtage
3.Working Partners : People moving in after process initiated and Managing day to day business of running - 20% weightage
4.Financial Risk Partners : People taking financial obligations , like arranging & providing finance, providing co-laterals security /morgaging properties, financial liabilities - 40 %
5.Technical Expertise partners : People having In & out knowlwdge of the workings of the business sector. - 20%
6. Anything else can be added or removed - X %
Land : project cost ratio - 1:40
All further investement will be generated from the business itself.
all weightages to be added and equal to 100 %.
can any one help in deciding the % weightage for each contribution. and justify the same.
That's usually the case with early start-up entrepreneurs wherein every one struggles to create a "Happy Equity Index" to be able to decide the right proportion of equity division.
In your case, it seems there are too many stakeholders with diverse contribution to the business. Hence, all of you should give some time to the business to flourish than deciding equity division in haste. Though I'm not a supporter of promoting something on Clarity, I'd like to share "Happy Equity Index" write up for your perusal. You can read it at http://366pi.com/one-business-with-multiple-co-founders-happy-equity-index/
Looking for any specific info? Do feel free to reach out.
The person offering the captal is usually provided by "silent partners" that you do not want driving the business as day to day "operators" - They could walk away from the business if they wanted, but the operator giving his blood sweat and tears everyday is a very powerful and motivating position to be in.
In my very personal opinion, The individual with the the majority of ownership should be the person that if he left the project, it would not move forward. The person ,this person must live and breath this startup, you want him incentivized to lay it all out on the line knowing he has something to gain. Time and time again I see people "fight over dinner before the food is on the table." - where friendships and work relationshps break apart because they had the "ugly conversation" too many week in after originally discussion. Soemone always leaeves feeling ripped off and scammed.
Under your current structure, I do not believe Startup Law Firms would advise what you have provided. Please double check.
Last but not least, be open and utilize http://www.foundrs.com - the best equity generator out there.
In my experience, it is best to wait as long as possible before dividing up equity. At the end of the day, "value" is usually going to be defined by how hard people work and how much they contribute. The more indispensable a person is, the more equity I would give them.
