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faqs:cap-table:good-equity-distribution [2016/09/04 14:22] mdavis |
faqs:cap-table:good-equity-distribution [2016/09/19 12:42] (current) |
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| - | ====== What is a good equity distribution? ====== | + | ===== What is a good equity distribution? ===== |
| As the leader of a company, you have many responsibilities. Among them is to set a vision for the company. Another is to lead (and motivate) your employees. Another is to attract and retain customers. In most industries, keeping employees happy is often key to keeping customers happy. Because start ups rarely have much cash, it is difficult to motivate employees with high salaries. It is the rare employee who will be excited to work for you on an exciting new project when they see that only you will become rich from their hard work. To solve this problem, you should share ownership with your employees. This creates a bond and common goal between founders and employees. Watch the great talk by Jerry Kaplan on this subject at [[http://ecorner.stanford.edu/authorMaterialInfo.html?mid=364]]. | As the leader of a company, you have many responsibilities. Among them is to set a vision for the company. Another is to lead (and motivate) your employees. Another is to attract and retain customers. In most industries, keeping employees happy is often key to keeping customers happy. Because start ups rarely have much cash, it is difficult to motivate employees with high salaries. It is the rare employee who will be excited to work for you on an exciting new project when they see that only you will become rich from their hard work. To solve this problem, you should share ownership with your employees. This creates a bond and common goal between founders and employees. Watch the great talk by Jerry Kaplan on this subject at [[http://ecorner.stanford.edu/authorMaterialInfo.html?mid=364]]. | ||
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| So, in conclusion, the rightmost three-column set on the cap table should show a relative distribution between founders and optionholders that expresses your management and leadership philosophy. And you have complete control over this outcome, as you will see below. | So, in conclusion, the rightmost three-column set on the cap table should show a relative distribution between founders and optionholders that expresses your management and leadership philosophy. And you have complete control over this outcome, as you will see below. | ||
| - | Next, you need to look at the relative relationship between the percentage ownership by the investors vs. that by founders and optionholders. Although some first-time entrepreneurs presume that investors want control, they don't! Investors want financial returns; the last thing they want to do is run your company! Although we will discuss below what you can do to affect the percentage ownership by investors, the bottom line is that you need to offer investors good financial returns. [[using_offtoa:financial-reports:internal-rate-of-return|See the help section on the Internal Rate of Return]]. | + | Next, you need to look at the relative relationship between the percentage ownership by the investors vs. that by founders and optionholders. Although some first-time entrepreneurs presume that investors want control, they don't! Investors want financial returns; the last thing they want to do is run your company! Although we will discuss below what you can do to affect the percentage ownership by investors, the bottom line is that you need to offer investors good financial returns. __[[:Using Offtoa:Financial Reports:Internal Rate of Return|See the help section on the Internal Rate of Return]]__. |
| {{keywords>options, personnel, employees, equity distribution, investors, founders, ownership}} | {{keywords>options, personnel, employees, equity distribution, investors, founders, ownership}} | ||
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| **[[:faqs:cap-table:how-view-cap-table|How do I see the cap table?]]** | **[[:faqs:cap-table:how-view-cap-table|How do I see the cap table?]]** | ||
| - | **[[:faqs:analysis-captable:financial-review-cap-table|How do I determine if my cap table is reasonable?]]** | + | **[[:faqs:analysis-cap-table:financial-review-cap-table|How do I determine if my cap table is reasonable?]]** |
| **[[:faqs:irr:how-see-irr|How can I see the IRR my investors will actually receive (if I meet all the assumptions)?]]** | **[[:faqs:irr:how-see-irr|How can I see the IRR my investors will actually receive (if I meet all the assumptions)?]]** | ||
