How To Distribute Startup Equity (The Smart Way) | Dan Martell


Do you have problems deciding how to divide the capital of your company between your team (co-founder), advisors and potential investors? In this video, I provide some guidelines and some things NOT MADE when I think about equity at the beginning.

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Good.

Due to popular demand, I have finally decided to face the one billion dollar beast.

And while it is not easy to have a conversation about equity startups without putting the weak of heart to sleep, it is territory that simply can not be overlooked.

Because for any growth-oriented entrepreneur who entertains the idea of ​​distributing shares in his company, mathematics is absolutely important …

And a small misstep can be the difference between accelerated growth or the passage of speed to hell from the start-up.

So, if you've ever wondered what a healthy equity breakdown looks like for all the key stakeholders (founders, advisers, investors and team members) …

… then take a quick spin on this new video.

As you can see, used appropriately, equity can be an incredible way to incentivize team members and attract key advisors and investors.

As I did with Travis Kalanick of Uber

But if you do not enter the conversation with a clear knowledge of the correct reference points to shoot …

… then you are preparing to give too much or lose talent and investors for other startups that play a much clearer number game.

So order your numbers.

Make the right offers.

And then get on the plate and use equity for the growth accelerator that is.

To divide the cake …

(and watching him grow),

– Dan

Do not forget to share this business advice with your friends, so they too can learn:

======================================
ABOUT DAN MARTELL
======================================

"You can only keep what you give away." That is the mantra that has shaped Dan Martell from a 20-something business owner in the Canadian Maritime (which is in the east) to a successful founder who has raised more than $ 3 million in a financing company and did not come out or one … or two … but three technology companies: Clarity.fm, Spheric and Flowtown.

You can only save what you give away. That philosophy has led Dan to invest in more than 33 start-up startups, such as Udemy, Intercom, Unbounce and Foodspotting. He also helped shape the future of Hootsuite as an advisor to the social media tour de force.

An activator, an expert in technology, an adrenaline junkie and, yes, a romantic (ask his wife Renee), Dan has recently focused his attention on teaching startups a fundamental, little-discussed lesson that directly impacts their growth: how to climb You will find not only incredible ideas in each moment of each talk given by Dan, but also highly actionable teachings that will boost your business. Because Dan freely gives of everything he knows. After all, you can only save what you give away.

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Video credits to Dan Martell YouTube channel





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    How To Distribute Startup Equity (The Smart Way) | Dan Martell

    Comments 44

    1. In the camera view your off to the left which led me to believe that you were going to have some sort of infographics to the right while you were speaking even something as simple as showing the percentage that you're talking about why you say it would have been helpful. Aside from that great video and thanks for the information

    2. I'm a big Shark Tank fan, and I've heard them talk about "advisory shares" a few times. "I'll offer you $250,000 for 7.5% plus 2.5% in advisory shares." What is an advisory share? Is it just their creative way of saying "I'm taking 10%" or what?

    3. hey Dan!!

      Bro. I have a business idea which would generate large money in years time..

      But I have no money to invest… Its still an idea..

      I went to an uncle of mine.. I explained the concept and everything.. He is ready to invest 3k $ for this idea..

      I'm from India, in India 3000$ are large amount to invest in business idea…

      Now the question is how much equity should I offer and as initially my self being the CEO of the company should I draw some salary out of it…. If YES.. how much it should be…

      please help me out… thanks..

    4. amazing video. love that there are no images, animation etc.. just u talking straight n giving broad estimates. short too.. phew!

    5. Thank you, Dan!
      I am starting a small company – fully funded by me, but it will operated in different market where I have the business associate/friend, I been doing lots of work together (I trust him). I would run the company remotely, but most of the field work would be done by him. Would it be fair to give him equity of only 20%, but then give him more revenue share (e.g. 50%) to incentivize his operation? Much appreciate your advice.

    6. What does an actual equity transaction look like. For example, if I were watching a private company issue five shares of stock to an investor, what would I see? Would I see the company CEO hand five signed certificates to the investor, while the investor hands cash to the CEO?

    7. small business making 20k a year in profit . how much should they pay investor back , asking for 10k. what percentage should be paid back and how many times a year will this be paid ? for how long

    8. Hi, can you explain.
      1. what if the another co-founder leaves, should he sell his shares?
      2. about the team, could you elaborate monthly vests up to four years. meaning?

    9. I AM STARTING A START UP NEXT MONTH BUT I HAVE VERY LESS KNOWLEADGE REGARDING EQUITY……I HAVE AN INVESTOR WHO IS GIVING ME AN INVESTMENT IN RETURN OF EQUITY……SO I WOULD LIKE TO KNOW WHAT ACTUALLY EQUITY STANDS FOR …DOES IT GIVES THE OWNERSHIP STAKES TO THE INVESTOR AND INCLUDE THEM IN BOARD OF DIRECTORS??? PLZ REPLY ASAP

    10. I am starting a starup and i have two guys who are interested in helping me, how do i share equity so i still have overall say in the company. thank you

    11. Hi, I like the way you made it simple but I really wanna know, are there any useful books in the market regarding this kinda topics? if yes, can you please suggest some?

      Thank you

    12. Hi, I am a startup and i am trying to fund from my personal network. They are small level funders who promise to fund me every month with a less money.

      On what basis can i provide them a equity..

    13. Hi Dan Martell, i am working on my startup, team consist of 3 people and we are ready with our beta version of the product. Right now we thought of incorporating the company, since all the 2 people work as a part time on the product. how much equity should i need to give them. or should i need to ask them to deposit some money give the equity. or should i incorporate company once i get the little customer traction, revenue in the company and my friend is ready put some money in the company. i am confused i dono what to do now… Please help me.

    14. Hi.. I started a company and ran it for 1 year. after that one of the guy joined in. He helps me in various things like website, strategies, he is more of an adviser. He spent 3 months with me working out on different busines models and stuff but now he wants to have some paper work ready for equity sharing. I am not sure how much equity I should be giving to him..please advise.

    15. May be a stupid question, I'm launching a clothing line. I don't have the money to launch the startup just yet (legal name, sample products, website) estimates maybe 1G. I have a guy who wants to invest to help me launch. He wants 50/50 for it. Obviously I'm not going to give him half. He doesn't bring much value besides his money and the ability to create a website and his network a bit. I have the social media following, my idea, I'm supplying the content and advertising. I was thinking 25% would be sufficient. What would be your thoughts.

    16. Great video thanks!
      I'm in a predicament here:
      Partner A has built audience of 23,000 followers over 5 years, and is starting a staffing agency. Will be busy with company #1 around 50-60 hours a week. Investing initial capital to startup (paying partner B salary of 50K, and buying website/CRM software).
      Partner B will be developing business from scratch using that audience, his B2B sales experience (good track record), and putting in 70 hours a week. Already has been for months on company #1. Will be responsible for learning industry, making sales process, and day to day operations of getting revenue.

      Question is: What % of company should each partner get here? Partner A will be very busy, but investing capital and giving his audience info for leverage. B will be doing lots of work here to develop it.

    17. me and my friend started a business. he invested 10k US$ and rest of the things are mine… idea, execution, business plan every thing… he is doing nothing else but as we were friends I made him founder… so how much equity I should give him?

    18. Informative video.

      I would like to ask a question here, what happens when a co-founder quits or isn't contributing as other?

      Do they keep their share life long? How do other founders benefit from the equity share they retain? Because if we call for dividends the co-founder who left benefits from it so how do we resolve this problem?

    19. Dan I'm on board with a company that already did a first round. I think I have a real good opportunity is it possible for me to set up a phone appointment with you.

    20. Hi Dan, Great vid. I found an investor who is willing to cover all business expenses for 50% equity. I also have a friend who is an expert at starting up businesses to consult me. I don't have money to pay him and he says that he is in it for the long-run. He is literally going to hold my hand through the entire process of building this business. Do you have advice as to how he should get reimbursed when the company makes money? How much equity should I offer him? Thanks for your time and for the vid!

    21. I am a founded of a company and all the idea is mine i am searching for co founders then how much equity do i need to give them

    22. Im thinking of negotiating 15% equity for an initial $50,000 investment for a restaurant concept startup. We need $250,000 to get off the ground. I'm struggling to figure out if that is too low or too high of a percentage, and I keep going back and fourth. I still need to find more investors too, so I don't want to give up too much just for $50k. Thanks!

    23. Very informative..
      I am planning my start up, and one guy, who is technically sound want to get more into the business, I am wondering if I should offer him equity or hire him as technical consultant? Though I have offered my complete website development task to a company but I need this person just to guide me at technical front from time to time.

      Please suggest.

    24. Hi, I have a question. Let's say I gave 20% for my 1st investor. Will the equity for the next investment round be split taking in
      consideration the 1st investor's share or will it be deducted only from the founders' remaining share? In other words, will the 1st investor keep his/her 20% after the next round? Thanks in advance.

    25. i just partnered with someone for a new company. i gave them 10% the question is how does dilution work. and how do class a shares work vs class b if we go public?

    26. if i build a company with 5 people in it and each invest about let say $100. so the total would be $500 and we split the equity evenly resulting in 20% each person. suddenly an investor is interested in investing let say about $80. How much equity for the investor ?

    27. Hi me again adding more details I know that you need to know more about the whole business in order to provide correct recommendations feel free to ask thanks very much appreciate really really a lot. I was thinking anywhere in the region of 70% to split between us the founders. Thanks man

    28. Hi Dan great great video thanks very much for the info but I was wondering if you could share more information on actually how to divide equity between the founders, we have three, me I am the founder and the inventor and also an investor now the father of the idea then there is a project manager and a coder a developer how do you roughly go here thanks very much appreciate your help.

    29. Thanks for reply. How much % Of equity we keep in free pool for upcoming investors in future. While we distribute quity among founders , small investors as well advisors

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