The Slicing Pie Handbook: Perfectly Fair Equity Splits for Bootstrapped Startups (Mike Moyer's Virtual Dojo)

by Mike Moyer

example, Julie and Chuck want to help Anne start a cinnamon roll shop, and they each put $10,000 into a company savings account for a total Well of $20,000. Anne needs $1,000 to cover the current month’s expenses, so she transfers the money to the company checking account. Because both Julie and Chuck have 50% ownership of the cash in the Well, $500 is attributed to each of them, and they each receive 2,000 slices of Pie (cash times four). The following month, Anne draws an additional $4,000 from the Well. Julie and Chuck each receive 8,000 slices. Anne is careful only to draw what she needs, so she doesn’t have to give up too many slices. Julie and Chuck know that she has an incentive to be smart with their money. Now the Well has $15,000 left. Suzanne is an investor who gives her another $15,000, so now the Well is $30,000. Suzanne owns 50% and Julie and Chuck each own 25%. Anne buys an oven that costs $10,000. $5,000 is attributed to Suzanne, so she receives 20,000 slices. Julie and Chuck each receive 10,000 slices for their $2,500 contribution or 25% of the total.