Startup Therapy Podcast

Episode #17


Ryan Rutan: Yeah. Mm hmm. Yeah. 50 50. Even Steven when splitting equity equal is best right? Probably not on today's startup therapy podcast will and I discuss why cutting things right down the middle is rarely fair to start and only gets further out of balance as time goes on. This is Ryan Rutan from startups dot com. I'm back for another episode of the startups therapy podcast joined as always by my partner will Schroeder. Today, we're going to talk about how the equity pie gets sliced up and this is often appointed confusion, mystery and contention for founders. And while it needs to be fair and forgive me for this equitable fair doesn't necessarily mean an even split right. There are plenty of ways to split equity that while fair aren't simply right down the middle. Well, let's talk about why uneven splits doesn't necessarily mean that one of the founders is being a jerk.

Wil Schroter: Yeah. And then that's the first thing that's on either founders minds, right? They're both thinking, oh man, if I suggest anything that isn't an even split, everything outside of the word even means someone's a jerk, right? And, and there's, you know, there's, there's a time and a place for that kind of discussion when you and I are at the lunch table splitting that peanut butter and jelly sandwich. Yes. Split down the middle, otherwise otherwise jerk, right?

Ryan Rutan: But

Wil Schroter: when we're talking about the fate of our company and everything that we're about to contribute and how we're about to devote our entire lives to this for probably a very long period of time. I don't feel like the Back of the Envelope. 50 50, I guess does it is a really adequate conversation for the size of this decision. You know

Ryan Rutan: what I mean? I think it works really well in one situation and that's when the Winklevoss twins are starting a company.

Wil Schroter: I

Ryan Rutan: think that's it

Wil Schroter: actually, it's the one and there's two of me. No, look, man. And so so here, here's how it plays out. Right? Right. Let's, let's pretend for a second. You and I are starting something from scratch and we haven't done this before because I'm going to I'm not going to say that this, this issue if you will, is only affects new founders, but it's more common because the new founders haven't been screwed over yet. So they're not really cognizant of of the the cost of this, right?

Ryan Rutan: Yeah, sure. And each one of these, unless you're starting something like the third one with the same partner or partners, the dynamic is going to be different each time anyway. So the conversation has to be revisited.

Wil Schroter: Yeah. And so all of our conversation has to start with Is how how do we continually decide over time whether or not we actually made a 5050 contribution. Right? So, so let's let's build on this because this is the heart of where everybody gets this wrong. Right? It starts out with, Hey Ryan, you're gonna put your time into it. I'm gonna put my time into it. Therefore we both have a 5050 contribution not true, right? For so many reasons, like from your standpoint, what's the first thing that comes to mind for you when you think of what's probably not going to be even here?

Ryan Rutan: Oh man, I mean it, it depends on the, it depends on the situation, right? But of course what you're doing, you're the calculus that you're performing is what do I anticipate? Because it's not about time, right? I mean of course time and money are related, but it's really about who is going to contribute, what, at what stage

Wil Schroter: that

Ryan Rutan: should move the business forward, right? And so it has everything to do with your, your existing skill set, the expectations of how that will be leveraged for the growth of the business, what you've done in the past, how much experience you're bringing, there's so many things that go into this. So I think you're just what you're really doing and it's super high levels, just looking at that other person across the table and thinking like what are they bringing and how much do I need that and how much is the success of the business hinged upon their ability to execute against that

Wil Schroter: for sure. And I'd like to break it into, if you will just a few buckets, the first bucket I would say is this is really important to us. Now, here's some great examples, right, Ryan heaven forbid you're the attorney, right? And so you're going to bring all the valuable, a short lived enterprise, but but you're going to bring all the formation value, right? You're going to set up our corporate docs, you're going to set up our early contracts at that moment. The value you're bringing is extraordinary, right? But but that burns off, right. We may not have any legal things to deal with next year or the year after. So while that's a ton of value now, it's not a ton of value later. Often you see this thing, this is in in things like design, you know, I'm I'm this wonderful designer and so I'm going to do our brand work and everything else like that. But that utility doesn't really extend past the first six months and certainly not to the same level of value. What all of this is, is really centering on is assigning a disproportionate amount of long term reward for a short term contribution.

Ryan Rutan: Exactly, right. The place I often will, Yeah, it does. And the place I see this most often is nontechnical founders asking me how I can find a technical co founder. And the joke that I always throw back at them and say because because it's exactly what you're doing at this point, I don't have any cash, I can't afford to pay a developer, which is really what I'm asking is what I'm saying, I need a developer. What I'm asking for instead is a technical co founder because I can't afford to pay a developer. Right? Right. So the joke I was supposed to get the missing, it's as if you're marrying a carpenter to ensure that you have a dream home, right? Maybe maybe the right objective, but probably the wrong methodology because over the long term, you know, if you don't really like hanging out with that with that contractor, that carpenter, it's not the best way to build that dream home. Right? And so I think that that's why it's so hard to figure out over over the long term. You can only look at in the short term. Right? So what are the contributions right now?

Wil Schroter: Right. And so part of that conversation in order to kind of feel good about it is, hey look, I understand you're going to be contributing X, y and Z this year and here's the value of that etcetera. Let's talk about how that contribution may persist next year and the year after. And if it's just something as simple as the person saying, well, I don't really know how much legal work we'd need in year two. Part of the discussion is going to be, well, why don't we assign additional stock based on that additional contribution in year two and we'll get into kind of how to how to change up 5050 splits in just a little bit here. But but that's just, that's just one common thing where you get a disproportionate amount of value, The next is almost harder to predict. But almost 100% chance it's going to happen is Ryan, you and I both are gung ho about this idea. We just came off of a startup weekend and we're so fired up about it and we were ready to quit our jobs, etcetera. But like two months goes by, right? And I was dumb enough to quit my job because I was really excited about this thing. You were smart enough not to quit your job, right? And now all of a sudden this is a part time job for you and it's a full time job for me. But lo and behold, We made a 5050 split two months ago and now this, this split doesn't represent where we stand whatsoever.

Ryan Rutan: Yeah. And I mean in the, in the short term, you might feel great about that. Well, I I in this example, I would feel great about that, right? Like I've got 50% of this thing and I'm only doing, you know, 10% of the work over time. That will not feel good for a lot of reasons. Um, and, and you know, even for the one who's on the, I'm gonna air quote this right side of the split, right?

Wil Schroter: Well, think about this to the tough thing about assigning equity, especially when you're 50 50 etcetera is it's a boatload of equity, right? I mean, at that point, you're saying, here's half the company and I'm expecting an exponential amount of contribution. And if you make anything less than an exponential about a contribution, which is the only thing you deserve to make at 50% equity in the company, we're screwed because that's equity that could have gone to that developer that we're trying not to pay. You know what I mean? All these things like that's real money, so to speak, that if we're assigning it disproportionately, that's going to hold us back.

Ryan Rutan: So what in the short term, forget about the long term for a minute in the short term, What do you see as being the most powerful concerns around the 5050 split?

Wil Schroter: Okay, so in the short term at first nothing will, will feel like anything's broken, will, will feel good about it. You know, we kind of just get past it and move forward. But inevitably Over a period of time called the first six months, 12 months and beyond, we're going to start to see how the different contributions actually play out, right? It is damn near impossible For both of us to contribute exactly 50% effort. I'm not saying it hasn't been done. I'm just saying when folks were first starting a startup, they forget or just haven't learned yet. Most cases that the likelihood that the contributions will stay in Paraty is very low, right? Just because you're both, there doesn't mean you're both contributing the same way. And that becomes pretty apparent in year at the end of year one, hell at the end of month 6 to be honest. Yeah.

Ryan Rutan: One of the things I've seen this do is drive bad behaviors, right, good, good intentions with bad behaviors you all of a sudden if, if both of you and, and typically you will, you know, one of them may be feeling it more than the other. Like I feel like I'm putting in more effort right? Which will manifest itself in some way. There's gonna be some passive aggressive commentary, something's going to happen. People are gonna notice that we're not putting the same amount of effort. What ends up happening then is you start to use the wrong benchmarks for your efforts right? All of a sudden if, if I feel like I'm putting in more effort maybe that the things that I'm doing aren't having the same impact of the things that you're doing, I'm gonna start pointing things like, well, you know, gosh, I was up till three o'clock in the morning last night working on, you know, one more of those things like it may not have any real value, right? But I start using these other things like just time and saddle as badges of courage in order to justify my existence in the company and that doesn't do anybody any good, right? But that is often times driven by this notion that, well it's a 50 50 split, we have to at least put on the appearance that we're both doing an equal amount of work. And I think that can be really, really damaging to the company and certainly to both of the founders or three, if it's a three way split or whatever,

Wil Schroter: you know, I've been through a bunch of these, I've done nine companies and almost all of them had co founders and A few things that I learned in watching both my own companies over the past 25 years, but also watching lots of other companies first things first. Whoever you think is in the founding team by month six by month 12 by month 18 probably won't be there right now In and of itself. That sounds like a challenge. But the real challenge is when you have a structure that says Bob got 50% of the company because he happened to be there on day one, and he's never had to earn it since. Right, dude, that's a huge problem, right? And it happens all the time when I look at startups now, either our own startup companies, you know, that we start or working with other folks. I tried to point out, I said, look, you don't want to sound terrible about this, but the folks that are sitting here probably won't be here next year, right, because it's so hard to figure out who's supposed to be on this team in the formative stages, right? There's a million reasons, you know, some good, some bad. But the truth is, you're gonna have a tremendous amount of turnover and that's not just with the employees, it's the founding team, right? It's the co founders. And so you've got to kind of plan for that outcome.

Ryan Rutan: That's the thing, right? It's it's the, you know, we've we've talked about this, you you wrote an article about this when when startups shed their skin, the notion that everybody is going to grow at the same pace and develop exactly the skills needed to, you know, maintain their role within the company. Sounds dumb, right? Well, so does then having an equitable split, right? This is the problem right there. Those needs change over time, the personalities change over time. And it's not always the need of the company could be the need of the individual. There's a lot of reasons that people leave companies and it's not always, well, I just, you know, couldn't contribute anymore. In fact, that's rarely the case. There's a lot of circumstances that lead to people, you know, needing to change either entirely, their involvement in the company or partially their involvement in the company. And then when you go back and lean on that 5050 split or even split, that becomes really, really painful for whoever still active and also on the cap table

Wil Schroter: agreed. And so the question everybody's going to have is, yeah, that's cool, but how do we actually make that happen? You know, what are the mechanics of, Okay? You know, I'm stuck in a 50 50 split now, you know, I'm listening this episode pretty closely because I'm hoping you guys will tell me what the hell to do about it, right? So let's talk about that. Let's walk through some of the mechanics of how do I either suggest something that's not a 50 50 split or If I do have a 5050 split, how do I over time, make it more equitable? It's actually not that hard, but not a lot of people are aware of how to do this. So we'll take a little bit of time here and and break it down. First thing to understand is that at any given time the company can issue more stock. The reason I say more stock is because people often think that Ryan, if you've got 50% and I've got 50% That if I now get 60% and you have, 40 that you have less stock, right? You can have the same number of shares, but I can have more shares added to the cap table and so that I hold more shares. So my effective share percentages 60%, your effective share percent is 40%, but nothing has been taken away from you

Ryan Rutan: and while it's just optics it matters.

Wil Schroter: Oh hell yeah, it matters and I can't emphasize enough how important that structure is now, By the way, this happens all the time and not just because co founders or what have you or are changing up the cap table or having these discussions, it's going to happen the moment you raise capital, investor is going to come on, you're going to issue more shares to that investor so that their relative percentages, whatever their investment stake is, you're gonna have the same amount of shares, It's just going to represent a smaller piece of the pie. So again, this isn't an unusual approach. This happens all the time. But what, what we want to do is we want to basically sit down and say, look for the next 123 years, we probably should set maybe an annual milestone where we suggest what either of us could do to earn more shares, agree on what those milestones would be and then assess at the end of the year, yep,

Ryan Rutan: it gives everybody a chance to remain equitable,

Wil Schroter: correct. But what you're really doing Is your starting to open up the conversation one That what you have now the 5050 split of the pie chart isn't necessarily what you're always going to have. Right, right?

Ryan Rutan: Nor is it simply based on the fact that you showed up

Wil Schroter: exactly it. Here's what you need to take entitlement off the table. You've got to take entitlement off the table. Right. My idea is 75%,, dude, it breeds no positive behaviors. Right? At which point I think I I have nothing to lose, no matter how hard I work or how little I work. That is the definition of entitlement in this scenario. And neither of you, you know, again, Ryan, this case of you and I, neither of us wants to be in that situation. So suggesting a way to prevent that benefits of sports. Sure. Right from the start. Yeah. So, so some of the milestones that I've seen folks used or that, you know, that I've used myself, um, one could be ours based. That's not always the right metric. But there could be a, a reason for that right? Running

Ryan Rutan: a billable hours company. That might be the perfect thing to do.

Wil Schroter: A simple one that I like a lot is just using a few committed milestones that would move the business forward for each individual person. So Ryan, in this case, if you were the technical co founder and I was business development, We would say, Okay for the over the next year we're gonna give each of us the opportunity to earn 10,000 shares In order to earn those 10,000 shares. You've got to commit to three milestones that you'll surpass and I'll commit to three milestones that I'll surpass right. It's not super, super complicated and it shouldn't be super complicated, but it should represent contribution, right? You can make it as simple or as hard as you want. Either way that the plan still works because again, you're starting to recalibrate contribution.

Ryan Rutan: And so really what we're talking about here is getting to a point where we can have the conversation and we can agree on it, right, whether you've already agreed to a 5050 split or you're just entering into that conversation, um it's important that we have the conversation that we come to some some level of agreement on this, right?

Wil Schroter: Yeah. And I don't think this conversation should be pointed toward, here's why I don't think you deserve, you know, 50%, et cetera it should be pointed to. How do we ensure that each of us can continue to contribute and get rewarded for it?

Ryan Rutan: I think the contribution over time piece, sorry, I think the contribution over time pieces is really easy to understand and I think that that one's a little bit more, you know, it's it's I think it's easier to agree on if we both do things in the future that we say that we can agree on a on a on an appropriate value for those things. I think when I when I'm dealing with this myself and when talking to other folks who are going through this, they have more of a challenge with that initial split, right? And I know that you don't need to get too caught up in that because it can be changed, but I think that that tends to be where the hang up is how what are some tips for people that want to enter into that conversation? So if I'm if I'm getting ready to sit down and have this conversation, how can I be prepared both on my side of the table? How can I be prepared to help my co founder understand how we're going to come down to that initial split?

Wil Schroter: Well, let's assume for a second one scenario that you kind of feel like your co founder is getting the better end of the bargain. Because I I can't imagine if you're the one getting the better end of the bargain, you're thinking like how do I undo this? Right? So, so let's assume for the sake of argument that that you're probably going to be on the wrong side of the equation. One of the ways that I've done this in the past is I've simply said, what can I do to to earn more equity right now in the future, etc. If someone says nothing, you've got 50%, there's nothing you can do. The conversation starts to get into. Well, is that really true? Are you saying that no matter how hard or how little I work, I can't possibly earn more equity? That's that seems unusual. And you start to talk about how contributions dr the equity equation now again, it depends, you know who you're talking to and what their concerns are. But I've always led the conversation from the standpoint of both of us want to contribute, shouldn't we be rewarded for our contributions? Not I want to contribute, shouldn't I be rewarded for my contributions?

Ryan Rutan: Yeah. And well, that that totally makes sense. But I want to go a step back in time. I want to go back to we just had this idea and we've started to formalize things were now ready to talk about the initial split because again, I think that understanding how the contribution works over time is a little bit easier to wrap our heads around. I think we can more easily come to agreement on what we would both do in the future because the reality is we don't know exactly what the effort that goes into that is, right? So I think we can both come to an arbitrary assignment of value. But when we're thinking about what we've done in the past, I would argue that we will typically put a lot more value because we know every bit of blood, sweat and tears, whatever that we've put in in the past, and our previous experience, previous businesses, whatever it was that we're trying to come up with some valuation of ourselves to come up with this initial split will probably always overvalue our own inputs and undervalue those of others. Right? And not always true? But I think that would be the natural tendency. So, as people are getting ready to sit down and have this initial conversation and we want to talk about how do we what's our basis for starting If we're suggesting that it's it's likely shouldn't be 5050. What can they do to walk into that conversation? To be prepared To justify a difference in the split? Either direction and again, like you said, they're probably never going to come in saying like, you know what, I really think you should have 70% of the thing. I should have 30 based on this. But let's talk about like how does that, how does that conversation begin? How do we start that with one without being a jerk and to being prepared to have the conversation in a way that it comes to some resolution. That's not just, Well, we can't agree that I'm worth more than you and and or that you're worth more than me. So we just end up my concern is people end up back at 5050 by default.

Wil Schroter: Well, actually, there's another answer there and it's easier than people might realize let's say this in this case. We both agree that there's, There may be more contribution in the future that neither of us can define right now, but we can't, we can't guess that it's 70%. You 30%, me or vice versa. We can still do an even split, but not necessarily a sign all the stock. Yes, we can do a 40, 40 split, which is still fair, you got 40, I got 40 leave the other 20% in an option pool that can be awarded later,

Ryan Rutan: Which is funny because it's essentially the same thing, right? It's still an even split. And so we're only changing the optics. But per the point earlier, the optics can be really important on this in terms of how it makes people feel

Wil Schroter: it's so important. And I'll give you just because a lot of people don't know this, you know, they haven't raised capital etcetera, investors are pretty hip to this as well. You know, when I've raised money from venture firms before even at this seed level, do you know that I have to give all my equity back, right? And I have to earn it through a vesting schedule as a founder the first time you hear that bullshit, right? Like what? You're like, hang

Ryan Rutan: on. What? Yeah.

Wil Schroter: Like what? Huh? I have to give back my equity, like it's mine, right? Like come on, I'm literally the founder of the company. How am I giving my equity back? But here's what the VC say in and I gotta tell you I went kicking and screaming, but in the end they're not wrong. What they're saying is, look, it's awesome that you started the company. It's awesome that you've done what you've done. But how do we know you're going to stick around if we put the cash in today and you bail in a year, then you never really contributed the value over an extended period of time for your commitments to hold up your end of the bargain. So we're going to basically have you vest your equity back over time, which simply means we're going to take it all away and then once a year we're going to give a portion of it to you back, just like an employee would, frankly, it's not terribly unfair. And a lot of, a lot of investors will, will say, okay, it's a, it's a four part vesting schedule and you get the first part upfront, right? You know, just as as kind of a good faith,

Ryan Rutan: Not starting at zero,

Wil Schroter: correct. But, but what it's saying is, look, man, you've got to continue to contribute, right? If you think you're entitled to your equity, especially when you're taking other people's money, just because, you know, you started the thing and filed, incorporation, put a year into the business. It ain't that simple.

Ryan Rutan: You know, it's a great example. And, and I think it's a great illustration that also explains why this doesn't work at the, at the formation stage, those investors are not investing in what you've already done, right? They're not paying you not giving you money for what you've already accomplished, they're giving you money because they think you can accomplish more, right? And that's where the value comes from, both for you and for them. And I think that if you just take that same thing and apply it to when you're, when you're founding the company and you're doing that initial split, it's the same thing, right? Where it doesn't matter what you've done up to this point, it matters what you contribute on a go forward basis.

Wil Schroter: The investors are just framing the same conversation that you and I are going to have as co founders Ryan Today, we're both here. That's the only reason that that we're both, you're splitting this 50, 50. We still have to make all of those contributions. That's what the implication of 5050 means that I have 50% because I'm going to contribute over some extended period of time, not just because I was the only other person in the room.

Ryan Rutan: And I think it's easier to understand in the context of an investor because their contribution is perfectly quantifiable because it's in terms of dollars. Now, the argument around what those dollars are worth versus what the company's worth is the point of contention. There's no disagreement about what's the value of a dollar, right, versus what's the value of an hour of somebody's time or an hour Worked 10 years of somebody's experience in the industry, right? Those are a bit harder to pin down. But the fundamentals of the conversation to your point are exactly the same.

Wil Schroter: Well along those lines, I I wouldn't want to overlook this and I rarely see this, although I love the concept of it is founder vesting, you know, simply in the same way if if you and I as co founders said, hey look, just, just as an absolute safeguard, we're going to agree that we each basically Vestar stock over the next three years. It's a, it's a four year program and we get the 1st 25% up front as a sign of good faith. I gotta tell you, I'm guessing I'm going to guess 50-60% of startups. Wish they had done this right now. Again, the ones that are still there at the startup, wish they had done this, the people that left and got all the equity for free so much. But again, we could do an entire show just based on this, about all the things that happened within the 1st 18 months of how all the co founder contribution changes, you know, all the early people that helped out Like service providers and stuff. How all that changes over time, people are making a really big commitment on this, 5050 based on the least amount of information they're ever going to have about their business.

Ryan Rutan: That's correct, Yeah. And I, having done this both ways and I've never reverted. Right. So in the past before I had stumbled across this methodology whereby we, we always best from the beginning, even as founders. Um, I would never, it's just my opinion, my, my own experience, I would never go back to what's the best immediately and just have a split and then have to fight about it all later. Right. The once you've done, once you've done vesting, I cannot imagine you could make too many cases for reversing that decision.

Wil Schroter: And I got to tell you, I've been on the opposite end of this to where I was, the one that had too much equity, right? You know, I had a startup that I did a while ago. I put a lot of my own money into a lot of my own time into it. We then raise some money. I went on to go do other startups and I was kind of working on it, but not working on all the time. And I had a disproportionate share of the cap table. I mean like 70% of the cap table and there were lots of other people involved in the, in the deal, including our investors. And at 1.1 of the investors steps forward and he goes, dude, this is a broken cap table, right? I'll never forget him telling me this. Right? Yeah, yeah, yeah. I remember him saying like, you know, this is a broken cap table. Like, I don't want to put more money into this thing because you've got all the stock and all the other people are actually working here, right? And I remember thinking two things at the same time, like literally two thoughts on either on a split screen, in my mind, one was go funk yourself worked so hard on

Ryan Rutan: your primary monitor or your secondary.

Wil Schroter: It literally at the same time, my other thought was holy cow, you're right. Like it didn't even occur to me, right? And uh, and I remember thinking like, yes, of course you wouldn't want to put more money into this. Like why would you? That's completely rational and we end up working through some things, but, but here's what I'm trying to say, coming from a guy who believes very strongly and everything we're talking about. Even I had a hard time. You know, it was like, you can have this out of my cold dead hands. Yes, method. And I'm saying, and I'm willing to have those conversations now, try getting that equity from people who have no experience in this and this is probably the only time they'll have equity and they feel like the year they put it is all the time in the world and so on, and so forth. You've got to have A moment in time. Hopefully a few where you can reassess and kind of change this. If this is 5050 locked forever. Dude, you're screwed.

Ryan Rutan: It's, yeah, it's, it's tough. And you talked about this point earlier, but it really is easier to talk about the value of that future contribution versus the value of the historical to your point just now, when somebody's put in that year, that's all the time in the world, as far as they're concerned because it's all the time in the world they put into this company, right? So it has all that value. It's really hard to get people to reverse their thinking on what's already happened. And so I think your, your best bet is to ensure that you're clear on how we modify this in the future and under what conditions and what that leads to.

Wil Schroter: Yeah. And, and so I I think we've got three things you're trying to accomplish, you know, in these conversations with your co founders, etcetera. The first is simply to establish that while 5050 is fair, you know, under under even at a mathematical level, right, it's clearly fair, it's not necessarily the long term outcome for the business as far as what the split is going to be, Just look at your co founder or maybe you have a couple and say, do you agree with that point? Do you do you understand that like maybe over time that our contributions could change that, that the equity could change Because if they don't, then then my other points are going to make a lick of difference. They're like, nope, I heard you get 50% up front, that's all you get the rest of the logic isn't going to matter. The second point, assuming they're reasonable and that they understand that stock can change the second point is that we need to be able to set some mechanism in place in order to be able to redistribute equity and that again, that can come in the form of adding more options etcetera or more shares etcetera and what that might look like. So one path could be simply doing a, um, a vesting schedule, right? It could be a simple, easy vesting schedule. Say look, this is a no brainer. You vest a third of your stock right now. Immediately a third at the end of year one, a third at the end of the year to all you got to be around is two years to get all of your stock right. That one is just like a hey is everybody committed to this thing? Like I am right, it's actually kind of hard to say no to although no lack of people will say no to it. Um, so again, the second thing are just mechanisms in place. The third thing is some sort of timetable to review these mechanisms right? Vesting has built in mechanisms vesting says, hey man at the end of year one you're the, here you're not. If you are, you get more stock built in mechanism. The other one Ryan we discussed was being able to have a yearly review could be a quarterly review right to say Did I hit the milestones that I said I was going to contribute towards. It could be time Yeah.

Ryan Rutan: And I think that's the important trigger right? Because you may not be able to say the milestones may not always line up exactly right. You may say like look, Here's the milestone we want to hit, but I believe this is going to take 18 months. Whereas the milestone that you're focused on May only take 12 and we both agree that those are the appropriate time frames for that. It's at the point you agree that the Milestone should be completed or otherwise that triggers that review and or crossing the milestone, if you happen to cross it at a year and we thought it was gonna take 18 months. go ahead and invest the rest of that stock,

Wil Schroter: here's another benefit. And I think this may catch people by surprise. The best thing about having these milestones is if everybody does what they say they're going to do, not a damn thing changes right. If nothing else, if the rest of this were complete farce and you're like, you know, I don't actually expect our stock to change, I just want to make sure everybody stays, you know, focused on point and committed well then it accomplishes the same goal in room. No matter where you are in the cap table, you should feel pretty strongly about that being a pretty important goal.

Ryan Rutan: Yeah, maintaining your position or, or improving your position should be the focus, right? Because those improvements in your position or at least the maintenance of it should be linked to the maintenance or growth of the company.

Wil Schroter: Absolutely all we're talking about here, All we're talking about is eliminating entitlement, the idea that hey, I just got my stock and I'm just gonna have this forever And just putting all of this on accountability, if you can accomplish those two things, even if you wind up with a 5050 split in the end, you've succeeded.

Ryan Rutan: Not much room left to be a jerk in that conversation. That's a wrap for this episode of the startup therapy podcast. This is Ryan Rutan on behalf of my partner Wil Schroder and all the startups dot com family thanking you for joining us and we hope you'll continue to join us. Be sure to subscribe rate and comment on itunes or wherever you love to listen to startup therapy. You can find all of our episodes at startups dot com slash podcast. If you're looking for more amazing resources to launch or grow your startup, be sure to head to startups dot com and check out startups unlimited. It's everything we have to offer from our online university to our amazing community of experts and founders and even all the tools we've built like biz plan, fungible and launch rock. It's everything a founder needs visit startups dot com slash begin that startups dot com slash B E G I N. You'll thank me later

Copyright © 2024 Startups.com LLC. All rights reserved.