Slicing Pie: Funding Your Company without Funds

Looking to simplify the equity situation in your startup? Want to remove the guesswork from how much equity to give employees? If so, you NEED to read this book!I've been burned several times in my career with complicated equity situations. I have fiercely negotiated large starting equity positions with companies that never meaningfully found product market fit and are now out of business. I have had close founder friendships torn apart during an insignificant monetization event because both sides were dissatisfied with allocation of ownership that was incorrectly guessed many years earlier. I have also worked for late stage companies where the initial share allocation was decided many years ago, far away from the current growth business where all the risk and upside to the company's future now lies. These situations are complicated, stress-inducing, and frankly not fair for all involved parties -- Trust me, I was there.I read an article that the author, Mike Moyer, wrote on BuiltInChicago.com that summarized the problem of slicing the equity pie problem, and his book's nutshell answer. Because of my history, the article resonated with me, and I downloaded the sample on my iPhone Kindle App. After reading the sample, my bell rang, and I not only had to read the Slicing Pie book, I had to read it TONIGHT!I bought the full book and hunkered down on my mission to read it start to finish.Mike did a great job of laying out the problem statement and breaking down his recommendation using an easy to understand analogy of an equity pie. Founders should not slicing the pie until it is fully baked baked and actually needs to be sliced (a significant monetization event). Then and only then do you engage the Lawyer types and exercise the system to decide how the pie will be divided according to a fair model, where the size of each contributor's pie is calculated given the size of each individual's relative value of their contributed time and materials they put in so far to help make the pie as big as it is today.This analogy is further empowered by the addition of the mythical creatures that make startups happen -- no not a dancing unicorn with rainbows in the background -- but Grunts. Grunts are simple creatures, but can make or break your business. They need to be treated fairly and motivated to continue contributing their valuable ingredients over time. Since Grunts are humans, they make human decisions and sometimes move on to their next pie, but still want to be treated fairly when this pie is sliced and served. Also new Grunts need to be added from time to time, and they need to feel they will be treated fairly given their contributions.Slicing Pie provides step by step instructions for you to follow to create your own Grunt Fund, and the companion site includes an AMAZING spreadsheet that simplifies the rubber meets the road of setting one up for your business.The simple to understand metaphors, detailed examples of how the solution works in several realistic situations, and especially the turn-key spreadsheet allow you to get up and running in as little as 5 hours from the time you get buy the book after reading my review. :)Since the Grunt Fund introduced is going to be the opening equity strategy into any future venture I pursue, and since Mike recommended that each investor and founder read the book, I ordered and received two print copies of the book to more easily share with future Grunts.

I came across the "Slicing Pie" website through a reference on Quora: "Whats the best way to split equity between partners": [...]At first, I was just going to try using the spreadsheet, but then I realized that I had lots of unanswered questions. The book is well worth the $8 Kindle price!Possibly the book meant a lot to me as I've lived through the mistakes, specifically a time back in the late 1990's when I co-founded a company with an equal split. I did the engineering and the partner was the business guy. At one point, we brought on some more developers, and next thing I knew, the new developers told the business guy they could do it better, and then I got squeezed out through a heart-wrenching experience. Of course, the new engineers didn't work out any better. I've also been through the entrepreneurship program at UC Berkeley's Haas School of Business during my MBA, and this topic was never clearly addressed. Mike presents a very simple, yet effective system for fairly dividing up the equity of an early stage startup. He covers about every what-if scenario that was on my mind.The bottom line is that if you're thinking of applying the principles in books such as "The Lean Startup" and "Rework" to see if there's really a market for your super-duper idea, and you're going to be working with any co-founders on the validation, then you should definitely consider the "slicing pie" technique.Here's a few of my favorite quotes:"Grunt Funds aren't for mean people.", Moyer, Mike (2012-09-04). Slicing Pie: Fund Your Company Without Funds (p. 105).A Grunt Fund, at its core, is about treating people fairly. While most entrepreneurs are motivated by money at some level, they are also motivated by being part of the game, working as a team and building something from scratch. Being a Grunt takes dedication and commitment. It's a hard life but the rewards are great-- even if the company isn't successful. The evidence is that many Grunts jump right back in to start-ups after leaving failed start-ups. They can't get enough. Moyer, Mike (2012-09-04). Slicing Pie: Fund Your Company Without Funds (p. 112).

We've been using Slicing Pie for about a year with our start-up. There are a lot of things that I really like about it, but some things are getting a bit complicated. I don't think it's really intended for long-term use and at a year it is getting a bit stale. The issue I have is that not every start up is the same, obviously, and the book seems most geared towards a company creating a gadget or an app with the goal of selling the company for millions and distributing profit in that manner. Without going into a ton of detail, we are creating something you can think of as a series. One thing is released, then a few months later, another. Our intention is not to sell the company, that's not even really a thing in the industry we are in. The issue we are faced with as we are approaching some funding deals is that we have members who have helped us, and deserve to be rewarded, but they won't be helping on all of the releases. Do they receive 5% equity forever on everything the company does? We also have people who played a small (all be it important) role in getting things going, but once we are awarding salaries would be paid more as consultants. These are small nuances that don't apply to all companies, or even most, but we are struggling with some of these things right now.I found the book after reading Founder's Dilemmas, and I can say that I really like the idea of dynamic equity. We are trying really hard to do it right, but there are a lot of challenges. We have been asked in meetings with very large investors about how we are dividing ownership and equity. Needless to say they were a little freaked out by our explanation. Biggest hurdle is that we have a bunch of people who have contributed some time here and there, are integral to getting us into these meetings in the first place, but our pie is getting crazy with so many slices.

This book could (and should) rewrite how start-ups can be funded with 'sweat equity' and how actual equity is then divided up. I expect that more and more startups will be founded and funded in this way. Mike is also available for additional questions and insights. Love it - and our first slicing pie company is underway!

Slicing Pie is a fantastic book if you are an entrepreneur and want to avoid many of the pitfalls of static equity. The model makes complete sense and will really allow the founders of a company to focus on building fantastic products rather than legal conversations about equity. Mike is also very approachable himself if there are any questions about the model you have. We are using the model for our start up at the moment and it is working extremely well. I would encourage all early stage entrepreneurs to read this book!

Great book, discovered at the perfect time.Lots of great advice and examples, so you can learn from the authors mistakes.

I've found Grunt Fund a very promising equity sharing method, at least for small tech/sotware/internet startups, where usually only a few people are involved, no huge initial investments needed, or complex contracts required. The book itself is well written, concise, uncluttered, pragmatic, and easy and fun to read. Very good. Strongly recommended. Don't forget to check the website[...]

It's a must for anyone starting something and tackles the problem that until some work is done, there's no value, but as soon as that value starts to be created, it gets harder to 'slice the pie'