In practice, this is usually not done, but it may present a conflict of interest if not done. Finally, it is advised that each member of the founding team be represented by different attorneys. Founders should take into account any contribution to the business that they believe should be recognized, including those listed on this page. It is best to settle their claims at the incorporation stage, where valuation is low, rather than having to deal with them at the time when the company has increased in value. That person may reappear at the time of venture financing, where the firm’s value has escalated, and assert an ownership right. For example, what if a person contributed actively at the pre-incorporation stage, but is not longer an active part of the founding group.
It can be a very sensitive issue - but delaying it may prove disastrous. Potential problem - split equity very early Splitting the ownership of the firm is one of the most difficult aspects of structuring the new business.
Potential Problem – Ockham founders split only based on amount of initial equity Other criteria to use: What cash, ideas, & property contributed? If property, what is value? What contributions are founders expected to make in the future? What opportunity costs will each founder incur? Career risk taken by each founder Financial demands faced by each founder May have to reserve ownership for future founders.
John Burr Ockham Technologies, Equity, Boards, and related issuesīoard of Directors Raised first round from VCs (Noro-Moseley & Monarch), with each getting one seat on the board Added a 5th, very experienced industry person Development/outsourcing – Outsourced to ThoughtMill Also hired Gus as internal development team leader Founder tensions Tensions continued to grow, and worsened after Ockham hired a COO Mike left Company sold in 2002 to competitorĤ Considerations in Allocating Initial Ownership 1 Ockham Technologies, Equity, Boards, and related issues
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