Today, we had another Open Coffee Club meeting at Thought Works campus. The theme for this meet is to discuss “Distributing Equity in Startup”.
We had a good gathering of 24 enthusiasts coming and it was a good distribution too – 60% first timers and remaining being the old gang including Ramjee, Himanshu, Sidu, Pratik and of course me 🙂
The discussion started with speaking about the equity distribution in a free-lancing kind of organization.
Ms. Manjula, who owns a startup in training and consultancy shared her experiences in distributing equity in her startup:
- We share revenues among ourselves.
- If I am involved in the contract, then I usually go for 70%-30% split.
- If I am not involved, then the person gets the complete share.
- They decide they stake at the agreement level itself.
- We usually make decisions on case-to-case basis.
People spend more than 60% of their time in office, and if you can be happy for that amount of time, then most of life’s motive is accomplished, which is irrespective of the salary and perks you earn is what Jayant Tewari, of Out Sourced CFO thinks. In India, we do not do architectural work and concentrate more on implementation work which reduces technical career path for people and this is where Entrepreneurs come from is what he had to say.
Let the stakeholder pay the employee directly, do not be a middleman and also build trust with employees, this brings results. You can also retain people with your projects for longer time. Startup’s do not put enough thought into ESOP’s. Usually, ESOP is not a good way of employee retainment, but ESOP is for people who are making things work in the organization.
How do you evaluate a one year old organization?
Ans: Look at your business plan, discount the financial projection by 50% straight.
Looking for a “Startup Capital” is being difficult in our scenario, only “Growth Capital” is being available to a large extent.
Sidu spoke about YCombinator, an organization focusing on seed funding for startup’s. YCombinator just helps entrepreneur’s with bare minimum fund for starting up their organization. The fund usually does not go beyond $20,000 with expectation of stake in-between 2%-10% from the startup.
Book Referrals – Here are few books for reference in Entrepreneurship and Innovation – Founders at Work, a compilation of stories of startup days is a fantastic read; The Art of Innovation – by Tom Kelley is an amazing read for understanding how Creativity pays and how you can innovate from the simplest of things in life; 37 Signals is a team which builds simple and focused software which help people collaborate and be organized.
Look forward for another OCC Meet in Bangalore.