A Startup Grunt
To help you manage your very own Grunt Fund (AKA “Slicing Pie Model”), we have created a handy dandy excel spreadsheet that calculates each co-founder’s slice of the Pie based on the formula outlined in The Slicing Pie Handbook.
Access the Grunt Fund Founder Equity Calculator here:
The video below provides a quick overview of how to use the startup equity calculator:
A Better Online Startup Equity Calculator
Excel is wonderful, but it has limitations. Many Slicing Pie users prefer to use the online Pie Slicer founder equity calculator. It’s not free, but it has several important advantages over the Excel version including the ability to allow each contributor to add their own contributions (with appropriate permissions), records of each person’s contributions for auditing and analysis, a variety of reporting features, proper application of the Slicing Pie recovery logic for when someone separates from the company, and more!
How Do You Calculate Startup Equity?
The entrepreneurship world is awash with startup equity calculating advice from smart, educated, successful, well-meaning people. Some of these people have distilled their wisdom into online apps that will help you and your team calculate equity for the cofounders. Some of them are even supported with research projects with input from dozens or even hundreds of real actual founders. There is only one problem: they are all wrong (except Slicing Pie).
The Fatal Founder Equity Split Flaw
The reason all cofounder equity calculators are wrong is that they all share one fatal flaw: they require the users to have the ability to accurately predict future events. The inputs are based on things like who’s idea was it (predicts that the idea actually matters, and the company won’t pivot), time commitment (predicts this won’t change), the importance of activity (predicts an individual’s productivity), I could go on, but you can check them out yourself. All other online equity calculators are based on traditional startup equity models which never work because it’s impossible to predict future events.
The Facts of Founder Equity Splits
Fairness is not a matter of opinion, it’s a matter of fact. The good news—which is often overlooked—is that in business facts can easily be observed and quantified in terms of fair market value. Everything in business is quantifiable, and I mean everything. Time, money, royalties, commissions, finder’s fees, consulting fees, legal fees, software fees, supplies, equipment, maintenance; literally everything can be bought and sold for its fair market value.
Because you can observe and track everything’s fair market value, there is no need to guess or predict anything when it comes to creating a fair startup equity allocation. The Slicing Pie online Pie Slicer startup equity calculator helps track these contributions over time. Kind of like how accounting software track payroll and expenses paid, the Pie Slicer tracks the unpaid portion of the fair market value.
If you’re reading this, I’m assuming you have a basic understanding of how Slicing Pie works; the equity calculator makes keeping track easier.
Renegotiating Founder Equity Splits is Painful
If you base your equity splits on assumptions—either your own assumptions or those built into an ineffective startup equity calculator, you must go back and change your equity split. It’s easy to get someone to change the split if the person is getting an increase, but much harder if you are asking for a decrease.
Getting a cofounder to decrease their share of the equity is never easy and often involves the deterioration of important founder relationships and the involvement of legal intervention which can quickly deplete already small financial and time resources. I’ve heard some lawyers estimate that 60%-80% of traditional equity splits wind up in disputes that require legal interventions. These are the kind of splits created by most cofounder equity calculators.
Smart People with Good Intentions for Equity Allocation in Startups
I have yet to find a startup equity calculator that was not developed by a very intelligent person with the best intentions of helping hapless founders make good choices about equity. Many of them are experienced entrepreneurs with status, wealth, and success that exceeds my own, but the fact remains that they are providing the same kind of fundamentally flawed advice that everyone else provides.
The Slicing Pie Startup Equity Calculator
Slicing Pie, unlike traditional equity formulas, is based on what people actually do during the bootstrapping stage of a company’s lifecycle and is designed specifically to accommodate changes over time so that it stays fair. Our founders pie calculator, called The Pie Slicer, helps the team keep track of who deserves equity and how much. The tool automatically adjusts based on observable changes in team membership, commitment levels, financial commitments, and even changes in corporate strategy.
Unlike other startup equity calculators, The Pie Slicer easily accommodates new team members and properly adjusts based on the specific circumstances of a teammate’s departure. The Pie Slicer software always works because it is based on the Slicing Pie model.
Startup Equity = Startup Ownership
One last note about what the startup equity calculator should be calculating. Equity represents ownership. Equity, however, can mean different things to different people. For instance, there are often different types of shares that are referred to as "equity". A share is often defined in the stock purchase agreement and can come with different features and entitlements. A few possibilities include:
- “Preferred” shares that get paid back before anyone else.
- “Restricted” shares that are subject to vesting.
- “Non-voting” shares that restrict voting rights.
- “Common” shares which are basic shares without restrictions or special rights.
We recommend that you use the Slicing Pie startup equity calculator to allocate common shares which are the basic, non-modified class of share. This ensures that all of the initial owners are treated the same with regard to their type of ownership.
After series A fundraising the investors might introduce new classes or shares or new restrictions on existing shares, but these terms will affect everyone who goes into the deal with the same rights.