From the analysis of financial reports, start-ups can be allocated in several ways: first, according to the proportion of capital contribution, which is the basis of equity allocation, according to the proportion of capital contribution to the total capital contribution, this way may make each investor get more or less equity.
For example, Company A has two initial shareholders, with the major shareholder holding 60% and the second shareholder holding 40%. In this creation equity structure, the equity is distributed according to the proportion of capital contribution of both parties, and the major shareholder has more capital contribution and higher shareholding ratio, so many things can be decided by the major shareholder. However, when the company increases or decreases the registered capital, equity transfer and other matters, due to the different shareholding ratios of the two shareholders, the equity structure may not be smoothly promoted.
According to China's Company Law, when a company holds a shareholders' meeting, it may amend its articles of association, increase or decrease its registered capital, or make resolutions on merger, division or change of the company, which must be passed by more than two thirds of the shareholders with voting rights. Two shareholders, one holding 60% and the other holding 40%, cannot reach two-thirds. As long as one person objects, things involving the company cannot be implemented.
The second way of equity distribution, average distribution. Two shareholders, one contributing 60% and the other 40%, share the equity equally. The average distribution method may weaken the control of the founder of the company and affect the decision-making of the company.
For example, four students, A, B, C and D, decided to start a business together and share the equity equally. With the development of the company, contradictions have followed. Some people enjoy success, while others work harder. The classic ending of the average equity method may be that the hard-working people left with a group of brothers, and the original company plummeted.
Entrepreneurial partners are company partners, and legal and reasonable equity distribution is helpful to improve enthusiasm, but if there is deviation in equity distribution, unnecessary contradictions may also arise.
Start-ups are generally small in scale and have less registered capital. The operating capital is relatively small, and the startup company can also adopt the way of equity plus salary to reduce the startup cost and improve the enthusiasm of each participant in the company. In order to protect the rights and interests of each shareholder, some start-up companies have set up detailed clauses in the agreement, such as restrictions on equity transfer, priority clauses for increase or decrease, and shareholder withdrawal clauses, to ensure that unnecessary contradictions are avoided in the future business process.
Take apples for example. Apple was short of money in its initial stage. Jobs plans to exchange a third of the company's shares for $50,000. Markkula brought $250,000 in working capital to the company and demanded a 26% stake. Apple's shareholding structure has changed from Jobs and Woz to Jobs, Woz and Markkula, each accounting for 26%, and 22% is used to attract follow-up investors. Four years later, Apple went public, nearly 100 employees became millionaires, and Apple was only five years old. Later, Jobs sold about 6.5 million Apple shares, accounting for about 1 1.3% of Apple at that time.
Human resources and organizational knowledge tell us that start-ups can have a variety of equity distribution methods. For example, the absolute holding type, the company's major issues are decided by a major shareholder. Relative control, democratic discussion on major and minor issues of the company.
Before the equity distribution of a startup company, it is more important to determine the partners than the shares. Finding a reliable partner makes equity allocation easier. Although there are successful examples of equity distribution, it is limited to experienced entrepreneurs, and early founders need to determine whether it is a monopoly or a multi-share. Try to avoid resources and technology as much as possible. The solution can also be to make an IOU, and the company will compensate after the revenue is profitable. For different talents, equity incentive may have different meanings.
Equity distribution is a process implemented by people. On the whole, the capital contribution can be in cash, in kind, intellectual property rights, etc. And startups can also get funds by getting angel investment and venture capital. Equity distribution is fair, efficient and controllable.
Only by turning pressure into motivation and being in a state of struggle at any time can an enterprise maintain its vigorous vitality.