How do start-ups set up equity structure?

Now, he is going to start a business with four friends and become an e-commerce brand of cosmetics. Among the five business partners, Xiao and two friends are full-time, another friend plans to work part-time and join full-time after a while, and the other friend just pays for it. An experienced person: don't average the ownership structure. Liu Yang (Partner of Hangzhou Dingju Investment Management Co., Ltd.) The common problem of some start-ups is the equalization of ownership structure. A few buddies came out to start a business. Let's just stay the same. But after the enterprise has developed for a period of time, everyone's contribution may be different. At this time, the average equity will bring some problems. In the United States, several founders share the equity equally, and so can the company. But in China, on the contrary, companies that can do it are more dominant. The more successful model is that there are large shareholders, who are the center of decision-making; In addition, plus a few minority shareholders who account for 10 or 8 points, they have the right to speak and can sing against the boss. Based on this model, there are different opinions and some people make decisions. Wang Yingchu (founding partner of venture capital chairman) I don't recommend that the founding team start holding more than three shares. If all five people get shares at the same time and share them equally, the follow-up process will basically have problems. We have experienced many shareholder infighting, and every time this happens, at least one person will leave. At the beginning, when there is no investment, we generally hope that the major shareholders in the team can maintain no less than 60% of the shares. If you want to go public in China, less than 50% can't stand dilution. To be listed in China, the China Securities Regulatory Commission requires major shareholders to hold at least 20% of the shares. A founding team has to go through two or three rounds of financing from the beginning to the final listing. It is possible to dilute 15% to 20% in the first round, above 10% in the second round and above 10% in the third round. The company sells 10~20% of the shares in each round, and all shareholders are diluted year-on-year. Basically, when it goes public, there are not many shares left. Equity distribution: the interest structure should be reasonable. Liuyang start-up companies are generally limited liability companies. The capital contribution can be in cash, in kind, intellectual property, etc. Contributions other than cash need to be evaluated or discussed, and the equity ratio should be set according to the value. In other words, money is a part, working ability is a part, and the original background and future contribution are also a part. The equity ratio is divided from these three levels. The basic principle of equity distribution is that the interest structure should be reasonable and the contribution should be positively related. Those who should get big shares should get the biggest shares, and those who should not get shares should not. For example, sales-oriented companies, the founders responsible for sales account for more shares; Product companies, founders responsible for research and development account for more. The basic principle is that equity is only given to irreplaceable people, and replaceable people generally do not need equity. If the founder doesn't work in the company at first, everyone will evaluate his contribution and give him some equity. Our opinion is that it should not exceed 5%. Such founders are often resource-based. For example, they may have some traffic or have some customer relationships, which is particularly important in the early stage of starting a business, but when the company develops to a certain stage, its importance will decrease. If he takes too many shares, it will become an obstacle. If you think such a person is more important, you can make up for it according to the resources he provides in the distribution of benefits. Founder Wang Yingchu doesn't work full-time in the company, so I definitely won't invest in this kind of project. Basically, the success rate of this part-time business is very low. Establish an anti-conflict mechanism Wang Yingchu. We see that enterprises with scattered shares are generally suggestions. One is to concentrate the shares, and the other is to establish an anti-conflict mechanism. The current practice is that everyone will sign an agreement with the sponsoring company, and the rights and obligations of both parties, including the settlement of disputes, will be clearly defined in black and white. For example, if a shareholder wants to leave for some reason, his equity will be recovered. At what price and in what way? For example, if you leave your job within one year, how many shares you will get back, and how many shares you will get back after one or two years. Usually three to five years. These must be clearly written in the agreement. When we encounter team infighting, it basically does not happen when the company's development is difficult, but when the company's situation improves, such as getting the investment, the business is progressing smoothly, and everyone sees the benefits. At this time, some people will feel that they have made greater contributions, or some people will want greater autonomy, which often leads to contradictions. New members introduced by the entrepreneurial team in the future do not need to reserve shares. After Liuyang's entrepreneurial team was founded for a period of time, important technicians and managers will join in, and it is the same whether to leave shares for these people or not. If you stay, you may have considered the need to absorb people from the beginning. If you don't stay, you can issue more. The final result is the same, but everyone has made a year-on-year dilution. For different companies in Liuyang, issuing options in time is different. Internet companies may stay in option pool when they are established, but some companies may be later. The timing depends on business development. Generally speaking, when enterprises can already see clear growth, issuing options will be the best time. If it had been issued earlier, although a lot of shares were offered as incentives, employees actually didn't feel it. If it is given when the business growth is good, employees can feel the increase of option value in the following time. Because the option is actually a double-edged sword, if the value keeps increasing, the incentive to employees is very strong, but if the option is given, it is completely meaningless to find that the value of the option has not increased or even decreased. Generally speaking, it is more appropriate to do option incentive and take out no more than 10% of the shares. Angel investment accounts for 10%~30% Liuyang. In the first round, we usually invest 10% to 30%, almost all around 20%. For angels, it may be less than 10%, and everyone can't vote. Angel investment is not only investing money, but also paying attention to and participating in the development of this enterprise. If it is lower than 10%, it may not be worth investing in this project. Of course, some people are casting nets, and it is possible to cast a 35-point project. Wang Yingchu is usually under our normal circumstances. We are both the second largest shareholders. In order to secure a seat on the board of directors, we must have enough say. Early project investors will invest more time than later ones. It is not cost-effective to spend such a large price, which only accounts for a small share.