So I read this really interesting blog by Noam Wasserman. As someone who is trying to make a go of his first company, one of the problems I face is how to give up equity in a way that makes sense. That is to say the right amount but not so much that there is “nothing” left for the original founders.
I have determined that percentage ownership is a very dangerous game .. one that I will not play. From the beginning, equity will be in terms of number of shares. The problem with percentage ownership is that at each funding event the percentage owned will drop. This creates the feeling of losing money or control. This tool is a good visualization tool.
I have decided that I am going to take my 100% ownership of nothing and convert it into two piles of stock. The smaller pile will be that which I intend to keep for myself. The other (much larger) pile will be that which I intend to distribute to investors and employees. In this way I don’t become trapped into thinking that I am “giving away my company”.