The Founders' Piece of the Pie

Matt McCall over at VC Confidential offers an interesting post on how founders should allocate equity for themselves, early employees, and friends and family investors.  He explores a couple of different methods that can be used and suggests how one might value stock or options grants in those days when there's really no product or revenue yet.

He also looks at circumstances where VC money may be used to help founders "take money off the table."  He notes that most VC's are not fond of the practice and do so typically in cases where the company is already turning a profit.  The concern in this scenario is the founder losing interest because he has already made at least a partial score on the company. 

Finally, he talks about the notion of accumulating IOU's for founder salaries.  Naturally, VC's want to see their money go for future growth, while some founders may have special circumstances that may require them to recoup some salary before a liquidity event.  Many first time founders, for instance, may not have the same cushion that a serial entrepreneur may be able to lean on.  Waiting for an exit could be especially painful financially for a founder with a family and no pre-existing nest egg, for instance.

Obviously all of these decisions depend on specific circumstances, but Matt's post should help founders think through the issues a bit.