So, you have a brilliant idea and you are ready to change the world? That’s great, but rarely does a company succeed with just one founder.
In most cases, you depend on a team of the best people you can find and a cofounder to be your soul mate.
Similar to most entrepreneurs who are starting for the first time, you will have a big challenge: You don’t have the money to pay someone to work with you full-time, so you decide to hand out shares.
Imagine where your company will be in 10 years and how much it will be worth. It’s not easy to give away a part of your dream, your idea and your future, but it's well worth it.
After starting three companies with co-founders, here are some of my personal best tips regarding splitting shares in a startup.
Why split shares?
One reason is your lack of money, but the most important reason to hand out shares to your employees is to provide people with a sense of ownership.
As soon as someone owns a part of you company, he or she will have an amazing feeling of belonging — belonging to something bigger than him or herself.
It’s a feeling that encourages people to push themselves out of their comfort zones and give that much needed 110 percent — given that they're willing to work for lower payment, or even for free — during the initial phases of your startup.
That’s one of the most important times in a company: when you tip beyond a vague idea to actually become a company full of enthusiastic and energetic people working to change the world! Don’t be afraid to give up some shares to your dedicated employees and cofounders in the beginning stages of your business.
When I started ClickLift, I had a vague idea about a new lifting solution offshore.
However, being 18 years old and having no experience whatsoever in the oil and gas industry, I had to find someone who could help me out with the engineering. With literally no money to pay an engineer, I embarked on the search for a cofounder. When I finally found him, we decided that we would split the business 50/50. Would I do that again? My answer: most likely not.
Splitting 50/50 is very risky. In any disagreement, both parties have equal rights to say or do what they believe to be correct. My best advice is to always keep a slightly greater percentage for you, like five or 10 percent more than your partner. This depends on how long you have worked on the idea and what your co-founder will contribute.
Despite that, I don’t regret handing out some of the shares in my startup. If I hadn’t, I would most likely still be walking around with the idea in my head, owning 100 percent of a company that doesn’t exist. What good would that do?
As your business grows, I advise you to always keep some shares to hand out to future employers and board members. You want your coworkers to feel that they own their own slice of the company -- even as little as 0.2 percent is enough to accomplish this. You want people to work for your company with blood, sweat and tears — not by sitting there, looking at the clock, wondering when they can go home.
They need a personal reason for wanting the company to succeed.
What to have in mind:
Never give out stock to someone who you don’t feel belongs in the company. I made this mistake because I didn’t follow my intuition. Getting someone out of a company can be a painful, long and exhausting process. It leads to time wasted when you should be focusing on growing your company.
So, when you first decide to share something, be sure the person you’re taking onboard is absolutely right. Trust your intuition – it’s there for a reason.
Get out there, find a cofounder/soul mate and start changing the world.
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