When starting a business, it is important to develop a reasonable blueprint for equity distribution. Next, I will share some knowledge of equity distribution with entrepreneurs, I hope it can be helpful to you.
First of all, we need to know that the people involved in the distribution of the company's equity are not only the company's founders and co-founders, but also employees, external advisors and investors. Therefore, when constructing the equity distribution blueprint, it is necessary to set aside part of the equity for later financing, employee incentives, etc.
The reserved equity is briefly divided into three aspects:
Equity incentive shares.
Equity incentives, also known as option incentives. To put it simply, the enterprise will distribute equity to some outstanding employees, and its purpose is to affirm and reward the work of outstanding employees, so as to retain excellent employees.
After the employee acquires the equity of the company, the employee will psychologically see themselves as a real part of the company and connect themselves to the company, which will help the company achieve the long-term goal of stable development.
Reserve a share of new partners.
In the process of development, the scale of the start-up company must be gradually expanding, which will lead to the increasing number of partners of the company, so the company reserves sufficient equity shares in the early stage, which is conducive to the company to absorb new partners, continuously inject new blood into the company, and promote the company to maintain innovation and development.
Reserved for financing dilutions.
When financing, it is an indispensable and necessary part of the company's development path, and each round of financing shares will be diluted, so if you want the company to be more successful in financing, you must set aside this part of the share in advance.
After setting aside the above three parts of equity, you have made a very important step in the equity distribution.
Reasonable equity distribution is an important foundation to avoid rapid failure of enterprises and escort the sustainable success of enterprises, and summarizes the "two cores and four major pitfalls" that start-ups need to pay attention to in equity distribution.
Two cores
Talent core. Everything must return to talents and serve talents.
Capital core. From the beginning of a business, an enterprise needs to go through a complete life process, which starts from having an idea or technology, gathers a team, forms a product, improves the product, verifies the business model, quickly replicates itself, and then expands across regions or industrial chains, until the final maturity and even listing, each stage of which requires continuous investment of funds as the foundation and driving force for the development of the enterprise. "Financing" has also become a strategic topic that all start-ups have to face at the beginning of their development.
Four pitfalls
Equal distribution of equity.
There are many problems and hidden dangers caused by the equal distribution of equity, and the psychological imbalance caused by the reservation and improvement of equity space in the future, the control of the company after the entry of investors, and the different contributions in the future will become the fuse of the company's fragmentation.
The team allocates equity in full proportion to the capital contribution.
In the past, the core or even the only basis for shareholder equity distribution was "how much money to pay", and "money" was the biggest variable. At present, "people" is the largest variable in equity distribution.
Premature allocation, one-time allocation, lack of constraints.
In the early stage of entrepreneurship, everyone divided the equity by dividing the equity by two, which is very debatable. On the one hand, such a one-time distribution lacks constraints on vested equity holders, which will lead to insufficient follow-up incentives and nourish laziness.
Second, because it is too early, the contribution and value of the team are not measured in a scientific way, so the rationality of equity distribution is not proven, and in the subsequent development process, with the advancement of the work, such a random distribution will become a greater hidden danger.
There is no exit mechanism for partner equity.
One of the biggest triggers of the partnership equity war is the complete absence of an exit mechanism. For example, some partners contributed 50,000 yuan in the early stage and held 30% of the company's equity. After 6 months of work, he voluntarily resigned due to discord with the team, or resigned passively due to incompetence, health reasons, or family changes.
In fact, in the era of human capital-driven entrepreneurship, we need to think not only about the issue of equity ratio, but also about the systematic design of equity.
Equity distribution must continue to develop with the development of the company, in order to make a reasonable equity distribution, we need to adhere to the spirit of seeking truth from facts and adapting measures to local conditions, and continue to develop the equity distribution mechanism with the changes in the company's environment.
Company Profile. Shenzhen Zongheng Strategy Equity Consulting focuses on solving problems such as top-level design, strategic planning, business model, brand planning, talent attraction and incentives, channel fission, equity financing, and corporate mergers and acquisitions, with a team of senior experts and original theoretical models.
Qu Xiufeng, the chief equity expert of the core member, is one of the first batch of equity consulting teachers in China, with 19 years of experience in senior executives and corporate management consulting of listed companies.
Vertical and horizontal strategy investigates and diagnoses the problems existing in the enterprise, proposes practical solutions, and helps cooperative customers become industry leaders.