In the second installment of his six part series for start-ups, Rod discusses the vexed issue of shareholding allocations. He raises some excellent points and ones which with our Kiwi “she’ll be right” mentality, new start-ups are likely to forget. Rod points out that;
People who have built and sold businesses will tell you that the biggest factor in the money they receive on exit is usually determined by shareholding decisions made in the beginning
Some pointers that Rod raises, and that less experienced businesspeople might not have thought about are;
- Capture as much value before bringing partners on board
- Write the shareholders agreement to take into account an early exit by one or more partners
- Account for sweat equity on the balance sheet on a regular bass to avoid loading it up pre-VC pitching
All great advice and points that I’ve personally made mistakes with in the past.