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0 pointsxal15y ago0 comments

because it pretends that 2 people of exactly the same value to the company. What are the odds of that?

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6 comments · 1 top-level

KleinmanB15y ago· 5 in thread

Hah! 50/50 of a new company is ZERO. If you are negotiating your "future value" (aggressively) with the person you are partnering with (and betting that they will pour their blood into to build the initial value), you probably have the wrong priorities to begin with.

Just taking the risk, starting at zero and pushing through the early phases is HUGELY valuable. That's why VCs don't start companies

(This advice changes a bit for well known, serial founders)

krschultz15y ago

That is looking at it from a valuation standpoint, from my perspective 51/49 is much better than 50/50. When push comes to shove, and you are 50/50, you are at a stalemate.

michaelfairley15y ago

If push comes to shove in a 2 person company, the company is already dead, regardless of the equity split.

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brudgers15y ago

Listening to Suster, I'd evaluate a bigger differential so that control can better survive dilution. For example, at 65/35 a single person could maintain control through 20% dilution. For YC a split of 57/43 would guarantee control through their investment.

mediaman15y ago

The problem is that while 50/50 can work, it rarely does, and it's nearly impossible to tell at the beginning whether it will, unless you have already had such an arrangement with someone and it worked well with them.

Sometimes it works well for a number of years, and then, at some later point, priorities change or differences emerge, or a culture clash happens, and the partners can have their own 'camps' of people, who sometimes don't get along.

In most cases it is better to have one person set the culture and long-term objectives of the company. However, they can and should start with other partners, who can have significant influence on both of those aims; with a good CEO it can even at times appear undifferentiable from equality, but at the end of the day one person should have the ability to call the decision to eliminate stalemates.

KleinmanB15y ago

This is really similar to the argument that it is foolish to bicker over seed valuation. It is difficult to compare skill set value during the first week of a product launch and when the company has critical mass or momentum. There are a ton of mitigating factors that push a company out of founding stage that arent product, code, marketing, relationship or related to traditional skill.

Its an imperfect science and an abstract distraction at a time when it is not a top priority.

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