slicing pie deck

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[email protected] @GruntFunds

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Page 1: Slicing Pie Deck

[email protected]

@GruntFunds

Page 2: Slicing Pie Deck

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

for the Allocation and Recovery of Equity in an

Early-Stage, BootstrappedStartup.

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Fun along the wayBIG

PAYOUTHARD WORK

@GruntFunds

Why startups start…

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Fun along the way ?HARD WORK

@GruntFunds

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

@GruntFunds

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Fair=Fun

@GruntFunds

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Your Share % =The Value of Your Contribution

The Total Value

Perfectly Fair Equity Calculation:

@GruntFunds

Page 9: Slicing Pie Deck

So…

Value creation estimates

Rule of thumb

Financial projections

Industry standards

Lawyers, advisors, professors

Girlfriend, boyfriend

Mom, dad, rich uncle

Darts

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Fixed Equity Split

67% split equity at the outset of the venture

* Wasserman/Hellman@GruntFunds

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“60/40”“51/49”

“25/30/45”

@GruntFunds

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But…

Value creation estimates

Rule of thumb

Financial projections

Industry standards

Lawyers, advisors, professors

Girlfriend, boyfriend

Mom, dad, rich uncle

Darts

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“50/50”“33.3/33.3/33.3”“25/25/25/25”

90%+ of startups do equal splits

@GruntFunds

Let’s keep it simple…

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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

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Your Share % >The Value of Your Contribution

The Total Value

Your Share % <The Value of Your Contribution

The Total Value

@GruntFunds

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Alligator Pit

@GruntFunds

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Not Fair=

Not Fun@GruntFunds

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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

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Dynamic Equity Split

@GruntFunds

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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

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

of what’s at risk.

@GruntFunds

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FairMarketValue

@GruntFunds

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1.Allocation Framework2.Recovery Framework

@GruntFunds

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Allocation Framework

1. Convert contributions to Slices

2.

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

Your Share % =Your Slices

Total Slices

@GruntFunds

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Convert to Slices

Non Cash Cash

@GruntFunds

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Convert to Slices

Non Cash Cash

FAIRMARKETVALUE

FAIRMARKETVALUE

@GruntFunds

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Convert to Slices

Non Cash Cash

FAIRMARKETVALUE

x2

FAIRMARKETVALUE

x4@GruntFunds

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Time

Fair Market Salary*

-

Cash Compensation

X

2

Grunt Hourly Resource Rate (GHRR!)

@GruntFunds * Hourly @ 2,000 Hours/Year

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Time

$50/hour*

X

2

=

Grunt Hourly Resource Rate (GHRR!)

100 slices/hr

@GruntFunds * $100,000 per year

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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

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Small Money

Cash Amount

X

4

(Investments Convert When Spent)

@GruntFunds

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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

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Everything Can Convert

• Unpaid Commission x 2

• Unpaid Royalty x 2

• Unreimbursed Expense x 4

@GruntFunds

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Grunt Funds in Action

@GruntFunds

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Grunts Contribute Different Things

Grunt 2Grunt 1Grunt 3

Jr. Developer Founder Rich Uncle

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Convert to Slices

Grunt 2Grunt 1Grunt 3

Jr. Developer Founder Rich Uncle

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Add ‘Em Up!

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Grunt 1’s Share

÷

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Grunt 2’s Share

÷

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Grunt 3’s Share

÷

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Sales Guy

Grunt 4

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Sales Guy

Grunt 4

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Grunt 1’s Share*

÷

*If the Grunt Does Nothing Else

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Grunt 2’s Share*

÷

*If the Grunt Does Nothing Else

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Grunt 3’s Share*

÷

*If the Grunt Does Nothing Else

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Grunt 4’s Share

÷

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Recovery Framework

@GruntFunds

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Recovery Framework

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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

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Removing a Grunt

• Keeps pie

• Buyback at Slices x $

• No non-compete

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Grunt 4

Convert to Slices

Grunt 2Grunt 1Grunt 3

Jr. Developer Founder Rich Uncle

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Grunt 4

Convert to Slices

Grunt 2Grunt 1Grunt 3

Jr. Developer Founder Rich Uncle

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Removing Contributions

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Grunt 2’s Share

÷

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Grunt 3’s Share

÷

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Grunt 4’s Share

÷

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Freezing the Pie

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Freezing the Pie

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Freezing the Pie

• When you can just pay people!

– Revenues

– Series A investment

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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

Page 74: Slicing Pie Deck

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

Page 75: Slicing Pie Deck

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

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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

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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

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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

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Freezing the Pie

@GruntFunds

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Freezing the Pie

Profits orProceeds

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Series A Investor

Negotiate $900,000 Pre Money

Raise $1,000,000

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Series A Investor

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

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Series A Investor

$1,900,000 Post-Money

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Freezing the Pie- Series A

Profits orProceeds

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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

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Slicing PieResources

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@GruntFunds

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@GruntFunds

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EUREKA!

[email protected]

@GruntFunds