Question: What is a good ownership vesting model for a startup where the founding partners do not contribute equally?

We are three partners collaborating on a startup. We have yet to formalize the ownership structure of the new business, but have agreed that we should use some kind of vesting model so partners earn their ownership share based on contributions over time. So far the three partners have not contributed equally to the startup.

What is a good model for a vesting agreement in our situation? Are there any commonly used methods for measuring/evaluating each partner's contributions to the startup so that vesting and ownership can be distributed as fair as possible?

2 Expert Insights

Michael Beck

Bringing Out the Best in People

7 insights

There is no "standard" approach to this. And the split is pretty subjective, based on capital contribution, knowledge contribution, network contribution, and effort contribution.

Not to be self-serving, but a good approach is to bring in someone from the outside, with no vested interest, to facilitate the conversation and agreement among the partners.

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Thomas Cox

Helping you drive exceptional results by "Becoming a Best Boss"

7 insights

Mike makes good points.  A competent outsider can steer the conversation, allowing all parties to focus on participating and thinking about their concerns.

Other points:

1. Prepare all participants similarly with some "principles" that all can agree on.  Example: "We want to respect both labor input and intellectual input."  Write these up on a wall or white board.

2. Prepare all participants with a good cheat sheet on how to engage in a win-win negotiation.  A good one is provided by my colleague Karen O'Keefe here:
https://docs.google.com/file/d/0B7GHdR4E6CbOZ2VOM2tvbWZpR0k/edit?usp=sharing

3. Remind everyone that an ideal negotiation is one where everyone feels a little disappointed. (This seems counter intuitive.)  If any party feels they got everything they wanted with no compromises, then that can invite resentment or second-guessing later that undercuts the deal that's arrived at.  (This is one of the most useful, yet unexpected, pieces of advice I know about the topic of negotiating.)

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