How to split shares with part-time founders?

I think, without a doubt, that the time a person spends working on the startup should determine the shares they are given in the firm. That said, I think the factors that should be taken into account are:

1) value already created,

try and quantify how much value you have already created in the firm, this is really an art and will be up for a lot of negotiation. things to think about here are using comparable firms as an example, or trying to do a 5yr DCF - but in a start up these are so uncertain, which is why this is more of an art than a science.

2) future intentions of founder,

it's very important to know the intentions of the person you are bringing on board as a founder. specifically you should know whether the person wants to remain active and dedicated as long as needed, or if they see this simply as a 1yr thing. This will play into the amount of value you think the person will add to the company. clearly, someone who wants to stay with the firm for only one year will add less value than someone wanting to commit 10 yrs. It may be a good idea to have the founder sign a letter of intent. I've seen this done before where the responsibilities of the founder are listed in an agreement and signed by both parties with some room for recourse if things go wrong. The last thing you want is to give someone equity in your venture and have them sit around and contribute nothing - it would be wise to have a clause that allows you to withdraw the founder's equity if they don't contribute.

and 3) capital already raised.

the above two points talk about the intangible value that has been (or will be) created in the venture. However, you must also add the actual amount of capital that has been spent up to this point. for example, if you believe you have created $100K of sweat equity in the firm and you have already spent $100k in cash, then you'd value the firm at a minimum of $200k - this is a very crude example.

If you have specific questions, reach me offline and I'd be glad to send over some documents that could help.

I have to say this again, part timers are not assets for any startup. If he is a believer he will drop everything and join in with all power and then I guess you don't have to ask the question.
Evan if he is a great asset and you want to retain him, know that experience and skills are not the key values of a founder, rather they are great values in an employee. So just settle with a salary with him, and don't consider to give him a bite of your startup unless he shows interest in sharing the risk.
Let's put it this way, if he wants to continue as a part timer, it means that he wants to have the best of both worlds, if things get bad he still has his job, if it turns out good he can then move on. Not a good recipe for a startup success cause simply what will happen when there is a conflict in interest between his job and your startup? what do you think he will choose?
A co founder is a risk taker who you can depend on, an employee is someone who you pay to get value. There are many other ways to retain good employees like stock options. But always be careful of what you give against what you win.

This is a fabulous article and one that increases the process of thought for start up business. Who contributes, what do you bring to the organization, how is your contribution weighted and what rate do you place on the contribution. Interesting and often a time where the real quality of a partnership is bought to light.

Michael Trade Finance

Sounds like you need to find a financial adviser. You can find one online. Try using Angie's List or another site to find one in your area. Good luck.

I would say that you calculate the cost by the hour s if you work 40 hours and they work 20 hours then the revenue would be split 66/33 if they have invested money then this would affect their shres but don't get pushed around by partners not willing to do work, if they don't do anything then they are just investors and should be treated that way with no say in day to day running of the business. If you want to promote your business quickly then offer printable coupons can be a good idea to get new business and retain existing customers.

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