Harvard i-lab | Dividing The Founder Pie with Jeffrey Beir of seed2A | Summary and Q&A

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February 11, 2013
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Harvard Innovation Labs
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Harvard i-lab | Dividing The Founder Pie with Jeffrey Beir of seed2A

TL;DR

This content discusses the process of dividing equity among co-founders and the implications of future financing on equity ownership.

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Key Insights

  • 🥶 It is crucial to have a conversation about relative ownership among co-founders to avoid future conflicts and ensure a fair distribution of equity.
  • 🧚 The weighted average contribution model can be a helpful tool in facilitating the conversation and determining fair allocations.
  • 🤨 Raising capital from investors can result in equity dilution, and founders should be aware of the terms and conditions related to option pools and future financing.
  • 😤 Understanding concepts like acceleration, vesting, and liquidation preference is essential when negotiating with investors and protecting the interests of the founding team.

Transcript

so this topic this is not what i do for a living i'll put that out there first but this was born out of several conversations i've had with a few teams in the ilab and kind of jody encouraged me to why don't you put it together and put your thoughts into a some kind of pitch so we can at least kind of talk people through the topic it's not an overl... Read More

Questions & Answers

Q: Why is it important to have a conversation about relative ownership among co-founders?

Having an open and transparent conversation about relative ownership can help avoid resentment and conflicts in the future. It ensures that each co-founder feels valued for their contributions.

Q: What factors should be considered when dividing the founder pie?

Factors such as the idea, technical approach, prototypes, business plan, commitment level, customer acquisition, and role going forward should be considered when dividing the founder pie.

Q: What happens to equity ownership when raising capital from investors?

When raising capital, the pie size increases, and investors will own a percentage of the company based on the investment amount and valuation. The founder's equity may be diluted depending on the size of the investment and the creation of an option pool for future employees.

Q: What is acceleration in terms of equity ownership?

Acceleration refers to the vesting schedule and the circumstances under which shares become fully vested. It can be negotiated for founders and key employees and may occur in the event of an early acquisition or IPO.

Summary & Key Takeaways

  • The content explores the importance of having a conversation with co-founders about relative ownership and dividing the founder pie.

  • It introduces a methodology called the weighted average contribution model to help facilitate the conversation and determine fair allocations.

  • The content also touches on venture capitalization and the impact of future financing on equity ownership.

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