The Dime💰 - Paying in Equity

Happy New Year, folks. Welcome to 2025. I hope your holiday went well. I’m looking forward to what we share together this year, and hope you’ll keep opening and reading. Let’s dig in though, here’s this week’s edition of The Dime💰.

One of the most vital issues you will have to solve as a founder is distributing equity in your company. You will constantly ask yourself who should have equity, how much, and why. It’s a very difficult question to answer and each question should be answered on a case by case basis. There’s no real balancing test or formula that can fast track this as each person at each stage provides different value. What you should always keep in mind is that you need to be as effective as possible when doing so because at the end of the day each person who has equity in your company needs to play a vital role in its success and ensuring that it moves forward. 

Typically in the beginning it appears that every single person who expresses interest in taking your company to the next level should get a piece of it. I mean it’s only fair right? Usually the early conversations with those people are very rosy and the possibilities are endless about where you can go in the future. Over time though, when you have to execute, the rose tinted lenses tend to become a bit more clear and those endless possibilities don’t look so endless anymore. Sometimes these relationships even end, whether you let them go, or they volunteer to leave, or simply stopped showing up. But you already gave your equity away, the only way to get it back is to use company cash to buy it. The tools I’ll introduce you to in this Dime may help you navigate those a bit better and also ensure that your cap table stays a bit cleaner for a longer period of time.