slicing pie deck

mike@slicingpie.com

@GruntFunds

Slicing Pie is a Universal, One-Size-Fits-All Solution

for the Allocation and Recovery of Equity in an

Early-Stage, BootstrappedStartup.

Fun along the wayBIG

PAYOUTHARD WORK

@GruntFunds

Why startups start…

Fun along the way ?HARD WORK

@GruntFunds

Success Criteria 1. Change the world2. Lots of money3. I get my fair share

@GruntFunds

Fair=Fun

@GruntFunds

Your Share % =The Value of Your Contribution

The Total Value

Perfectly Fair Equity Calculation:

@GruntFunds

So…

Value creation estimates

Rule of thumb

Financial projections

Industry standards

Lawyers, advisors, professors

Girlfriend, boyfriend

Mom, dad, rich uncle

Darts

Fixed Equity Split

67% split equity at the outset of the venture

* Wasserman/Hellman@GruntFunds

“60/40”“51/49”

“25/30/45”

@GruntFunds

But…

Value creation estimates

Rule of thumb

Financial projections

Industry standards

Lawyers, advisors, professors

Girlfriend, boyfriend

Mom, dad, rich uncle

Darts

“50/50”“33.3/33.3/33.3”“25/25/25/25”

90%+ of startups do equal splits

@GruntFunds

Let’s keep it simple…

You do all the work?

You bring in another guy?

Your partner wants to quit?

1,000,000 other things?

But, what if…

You want to quit?

Your CTO gets hit by a bus?

@GruntFunds

Your Share % >The Value of Your Contribution

The Total Value

Your Share % <The Value of Your Contribution

The Total Value

@GruntFunds

Alligator Pit

@GruntFunds

Not Fair=

Not Fun@GruntFunds

What We Need

• Perfectly fair

• Rewards contributions

• Provides motivation

• Accommodates team changes

• Flexible in the face of rapid change

• Gets rid of the gators!

@GruntFunds

Dynamic Equity Split

@GruntFunds

You Contribute 50% = You Get 50%You Contribute 10% = You Get 10%

You Contribute 23.2% = You Get 23.2%

No more and no less

@GruntFunds

A person’s % share of the rewards should equal that person’s % share

of what’s at risk.

@GruntFunds

FairMarketValue

@GruntFunds

1.Allocation Framework2.Recovery Framework

@GruntFunds

Allocation Framework

1. Convert contributions to Slices

2.

1. Allow it to self adjust over time (dynamic)

Your Share % =Your Slices

Total Slices

@GruntFunds

Convert to Slices

Non Cash Cash

@GruntFunds

Convert to Slices

Non Cash Cash

FAIRMARKETVALUE

FAIRMARKETVALUE

@GruntFunds

Convert to Slices

Non Cash Cash

FAIRMARKETVALUE

x2

FAIRMARKETVALUE

x4@GruntFunds

Time

Fair Market Salary*

-

Cash Compensation

X

2

Grunt Hourly Resource Rate (GHRR!)

@GruntFunds * Hourly @ 2,000 Hours/Year

Time

$50/hour*

X

2

=

Grunt Hourly Resource Rate (GHRR!)

100 slices/hr

@GruntFunds * $100,000 per year

Time

$50/hour* - $10/hour paid in cash

=

$40/hour at-risk

X

2

=

Grunt Hourly Resource Rate (GHRR!)

80 slices/hr

@GruntFunds * $100,000 per year

Small Money

Cash Amount

X

4

(Investments Convert When Spent)

@GruntFunds

Equipment

• New = Purchase price x 4 (cash)

• Less than a year old = Purchase price x 2 (non-cash)

• Older than a year = Book value x 2 (non-cash)

@GruntFunds

Everything Can Convert

• Unpaid Commission x 2

• Unpaid Royalty x 2

• Unreimbursed Expense x 4

@GruntFunds

Grunt Funds in Action

@GruntFunds

Grunts Contribute Different Things

Grunt 2Grunt 1Grunt 3

Jr. Developer Founder Rich Uncle

Convert to Slices

Grunt 2Grunt 1Grunt 3

Jr. Developer Founder Rich Uncle

Add ‘Em Up!

Grunt 1’s Share

÷

Grunt 2’s Share

÷

Grunt 3’s Share

÷

Sales Guy

Grunt 4

Sales Guy

Grunt 4

Grunt 1’s Share*

÷

*If the Grunt Does Nothing Else

Grunt 2’s Share*

÷

*If the Grunt Does Nothing Else

Grunt 3’s Share*

÷

*If the Grunt Does Nothing Else

Grunt 4’s Share

÷

Recovery Framework

@GruntFunds

Recovery Framework

Recovery

• No pie for non-cash

• No multiplier for cash or tangible property

• Buy back (if possible) at 1x cash contributions

• Non-compete

• Loyal employee protection

Removing a Grunt

• Keeps pie

• Buyback at Slices x $

• No non-compete

Grunt 4

Convert to Slices

Grunt 2Grunt 1Grunt 3

Jr. Developer Founder Rich Uncle

Grunt 4

Convert to Slices

Grunt 2Grunt 1Grunt 3

Jr. Developer Founder Rich Uncle

Removing Contributions

Grunt 2’s Share

÷

Grunt 3’s Share

÷

Grunt 4’s Share

÷

Freezing the Pie

Freezing the Pie

Freezing the Pie

• When you can just pay people!

– Revenues

– Series A investment

Time

$50/hour* - $0/hour paid in cash

=

$50/hour at-risk

X

2

=

Grunt Hourly Resource Rate (GHRR!)

100 slices/hr

@GruntFunds * $100,000 per year

Time

$50/hour* - $10/hour paid in cash

=

$40/hour at-risk

X

2

=

Grunt Hourly Resource Rate (GHRR!)

80 slices/hr

@GruntFunds * $100,000 per year

Time

$50/hour* - $20/hour paid in cash

=

$30/hour at-risk

X

2

=

Grunt Hourly Resource Rate (GHRR!)

60 slices/hr

@GruntFunds * $100,000 per year

Time

$50/hour* - $30/hour paid in cash

=

$20/hour at-risk

X

2

=

Grunt Hourly Resource Rate (GHRR!)

40 slices/hr

@GruntFunds * $100,000 per year

Time

$50/hour* - $40/hour paid in cash

=

$10/hour at-risk

X

2

=

Grunt Hourly Resource Rate (GHRR!)

20 slices/hr

@GruntFunds * $100,000 per year

Time

$50/hour* - $50/hour paid in cash

=

$0/hour at-risk

X

2

=

Grunt Hourly Resource Rate (GHRR!)

0 slices/hr

@GruntFunds * $100,000 per year

Freezing the Pie

@GruntFunds

Freezing the Pie

Profits orProceeds

Series A Investor

Negotiate $900,000 Pre Money

Raise $1,000,000

Series A Investor

$1,000,000 + $900,000 = $1,900,000

Series A Investor

$1,900,000 Post-Money

Freezing the Pie- Series A

Profits orProceeds

What We Got

• Perfectly fair

• Rewards contributions

• Provides motivation

• Accommodates team changes

• Flexible in the face of rapid change

• Gets rid of the gators!

@GruntFunds

Slicing PieResources

@GruntFunds

@GruntFunds

EUREKA!

mike@slicingpie.com

@GruntFunds