Equity uncertainty when 2 others join

[jp2010]

I've created several plans and models, done a bit of cold calling (emailing), and found one interested partner perhaps. One has numbers, the others has the IT skills, and I have expertise in the field they seek to establish a service in. When the three of us sit at a table... what is the best practice for dividing equity if our three skillbases vary greatly but yet are so important to the development?

What happens when winds change?

I've invested a great deal of sweat equity into the market and offer an advantage over them, but what might I do?

-JP

[dmz123]

Well, have been there, struggled and figured my way out.

No 1. rule, if your biz has Intellectual property (patent-pending), you should own it 100%. Rest of the terms you can dictate/negotiate very much. Usually on the valuation there after
and put a $ value to how much each is contributing as sweat-equity
or $ into the bank. Equity (most likely founder/co-founders is
pretty much simple proprotion(ratio)/arithmatic)

If you dont own IP, but something of say like "restaurant" biz,
then its pretty much how much each is contributing in terms $s
or sweat-equity converted into dollars (very subjective).

Pay attention to who owns the major stake (ideally you should own
>51) else it will be a chaotic democracy doomed to fail.

Hope this helps.

SCORE helps you! Take their mentoring services, its free
good luck

[rogercbryan]

I like the above posters advice about calling SBA/SCORE. Every deal is different to there in no clear cut way to do this.

[warrensway]

It can easily be set up just use an excel document agree on what is worth what when it happens and then go and do it. Agree beforehand get it in writing. Obviously there is a value to the sweat equity, but you also have to realize some sweat equity is more valuable. Cold Calling for example may be worth less than something else. Just set up a scale agree on it and make sure it is documented.