The contrast between the Zipcar and Ockham cases also sparked my interest in how the past relationships of the founders (e.g., prior friends or co-workers, vs. Question #2: Have you seen other constructive or creative solutions to solving the problems with the Zipcar approach? Even though Allen had left Microsoft in late 1982 for health reasons, this was still the same ratio of ownership (45%/25% = 1.8 in 1986) as when they split the equity in 1977 (64%/36% = 1.8), suggesting that except for dilution from selling additional shares after the initial split, there was no equity adjustment between the two founders. At the time of Microsoft’s IPO in 1986, Gates owned 45% and Allen owned 25%, according to the company’s filings at the time. However, as in the Zipcar model, the split seems to have been static. Their initial equity split was unequal (after a slight early adjustment, 64% for Bill Gates, 36% for Paul Allen), due to differences in what each founder was giving up to join Microsoft, in their anticipated roles (their titles would be “President” and “Vice President,” respectively), and other factors. In my recent keynote at the Emerging Ventures conference, I also drew upon some ancient Microsoft history, wherein Microsoft’s founders seem to have used parts of each approach. Second, they crafted a “ dynamic“ founder agreement where any founders who were not participating in the company full-time a year after founding would surrender their equity (in effect, imposing conditional vesting on themselves). First, the three founders (who had long been co-workers) split the initial equity unequally (50/30/20, based on the different amounts of capital that the 3 contributed the founder who became CEO got the 50%). We use my “Ockham” case as a counter-case to Zipcar. Question #1: How do your experiences with equal equity splits compare to this? That first handshake caused a huge amount of angst over the next year and a half.” When she later visited our MBA classroom to watch us teach the case, the founder-CEO said, “That was a really stupid handshake because who knows what skill sets and what milestones and what achievements are going to be valuable as you move ahead. ![]() The other founder kept her other job and contributed far less to the company, but still owned the same amount of equity in the company. (Commonly known as the “Rule of N” approach with N founders, each founder gets 1/N of the equity.) One founder ended up joining Zipcar full-time as its CEO and went on to become the driving force (sorry for the pun :->) behind the company. ![]() ![]() The two founders, who barely knew each other before founding the company, went the “ easy handshake” route and split the equity 50/50. In our first-year MBA Entrepreneurship course, the Zipcar case represents the typical approach to splitting the equity. That issue is equity splits within the founding team. Let’s kick off 2006 with an issue about which I get a lot of questions (and which StatCounter reports is one of the highest-ranking Google search terms that lead people to this blog).
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