Become a Creator today!Start creating today - Share your story with the world!
Start for free
00:00:00
00:00:01
Slicing the Equity Pie – a conversation with author Mike Moyer
0 Playsin 21 hours
Mike Moyer is a serial entrepreneur and the fonder of Slicing Pie the world’s only fair start-up equity calculator.
Now Mike has written a book, the Slicing Pie Handbook.
In this episode of the Abeceder podcast The Independent Minds, mike shares with host Michael Millward how the SaaS behind Slicing Pie works and how the entrepreneurs can use both Slicing Pie and the Slicing Pie Handbook.
During their discussion, Mike and Michael discuss how setting up a business can be like playing a game of black jack or pontoon. Two entrepreneurs agree to split their winnings 50/50, but they total amount of money they bet is not equally split.
Mike explains how Slicing Pie helps entrepreneurs to achieve a more equal share of the equity in the business they have founded.
More information about Mike Moyer and Michael Millward is available at abeceder.
The Independent Minds is made on Zencastr, because as the all-in-one podcasting platform, Zencastr really does make creating content so easy.
If you would like to try podcasting using Zencastr visit zencastr.com/pricing and use our offer code ABECEDER.
Travel
Mike is based in Michigan USA. With discounted membership of the Ultimate Travel Club, you can travel to Michigan, or anywhere else at trade prices on flights, hotels, trains, and so many more travel related purchases.
Fit For Work Look after your health and you will be fit for work.
It is important for entrepreneurs maintain good mental and physical health. That is why we recommend The Annual Health Test from York Test; a 39-health marker Annual Health Test conducted by an experienced phlebotomist Hospital standard tests are carried out in a UKAS-accredited and CQC-compliant laboratory.
A secure Personal Wellness Hub provides easy-to-understand results and lifestyle guidance
Visit York Test and use this discount code MIND25.
Three the network Visit Three for information about business and personal telecom solutions from Three, and the special offers available when you quote my referral code WPFNUQHU.
Being a Guest
We recommend that potential guests take one of the podcasting guest training programmes available from Work Place Learning Centre.
We use Matchmaker.fm to connect with potential guests If you are a podcaster looking for interesting guests or if you have something interesting to say Matchmaker.fm is where great guests and great hosts are matched and great podcasts are hatched. Use our offer code MILW10 for a discount on membership.
We appreciate every like, download, and subscriber.
Thank you for listening.
Recommended
Transcript
Introduction to 'Independent Minds' and Guest Mike Moyer
00:00:05
Speaker
on zencastr Hello and welcome to the Independent Minds, a series of conversations between Abysida and people who think outside the box about how work works with the aim of creating better workplace experiences for everyone.
00:00:21
Speaker
I am your host, Michael Millward, the Managing Director of Abysida. In this episode of The Independent Minds, my guest is Mike Moyer, author of a book called so The Slicing the Pie Handbook.
00:00:37
Speaker
The Independent Minds is the podcast where we don't tell you what to think, but we do hope to make you think.
Zencastr Promotion
00:00:45
Speaker
As the jingle at the start of this podcast says, the independent minds is made on Zencastr. Zencastr is the all-in-one podcasting platform on which you can create your podcast in one place and then distribute it to all the major platforms like Spotify, Apple, Google, and lots of smaller ones as well.
00:01:05
Speaker
It really does make creating content so easy. If you would like to try podcasting using Zencastr, Visit Zencastr.com forward slash pricing and use my offer code, Abbasida.
00:01:19
Speaker
All the details are in the description. Now that I've told you how wonderful Zencastr is for creating podcasts, we should make one. One that will be well worth liking, downloading and subscribing to.
Mike Moyer's Background and Passion for Sailing
00:01:36
Speaker
In this episode of The Independent Minds, my guest, who I met on matchmaker.fm, is Mike Moyer, who runs Slicing the Pie, and is author of a book called so The Slicing the Pie Handbook.
00:01:51
Speaker
Hello, Mike. Hi, how are you? Thanks for having me today. Oh, it's great. I'm really looking forward to this. I think slicing the pie is an issue that lots of people who run businesses would be interested in because slicing the pie is not a baker's, is it?
00:02:07
Speaker
Definitely not.
00:02:10
Speaker
Yeah. Whereabouts in the world are you today then, Mike? I live in Lake Forest, Illinois, which is north of Chicago. right. It must be close to Lake Michigan then.
00:02:21
Speaker
Very close. We're right on the lake. And I'm definitely a sailor, I like to take advantage of that when it's warm out, which it's not today. No, we're talking in the towards the end of January. It's cold here in the United Kingdom, but colder in the in the Midwest of the United States, I imagine.
00:02:38
Speaker
Yes, definitely. It's cold and rainy and not too pleasant out. Oh, well, if you fancy a trip to Chicago, a good place to plan your travel is the Ultimate Travel Club.
00:02:50
Speaker
It is where you will get trade prices on flights and hotels. You'll find a link and a membership discount code in the description.
Origins of 'Slicing the Pie' and Equity Issues
00:02:58
Speaker
Now, Mike, please can we start by you explaining a little bit about your backstory, how you came to be running Slicing the Pie, and then we will talk more about the organization and the solution to the problem that it offers.
00:03:15
Speaker
And you must tell me, is it slicing pie or slicing the pie? What's the correct name? Slicing pie. So, yeah, we'll, uh, please explain a little bit about your history and then we'll have a conversation. We'll talk about slicing pie and the these software is as a, as a service solution that you've created as well.
00:03:36
Speaker
Please. Sure. I've been a ah serial entrepreneur most of my career starting when I was in college. I had a, company that made t shirts and jackets and things for for for fraternity houses and sorority houses and then I yeah moved on from there to a variety of different positions kind of flip flopping between startup job and real job and startup job and real job.
00:03:59
Speaker
I've worked in every industry from fine wine to motorhome chassis to vacuum cleaners to financial services, all kinds of things. And as my life as an entrepreneur developed, I noticed that I was getting into bad negotiations with my partners, ah bad equity split deals.
00:04:18
Speaker
And I'm not the only one that faces this problem. Everyone who works with a partner faces the issue of how to divide up equity. And one thing I realized was that just because you agree to something doesn't make it fair.
00:04:34
Speaker
So a lot of times people have discussions. and I started a company years ago and did quite well and sold out a couple of years ago. But my co-founder in our operating agreement had a line that said he could buy back shares at basically no value.
00:04:53
Speaker
So he bought my shares back for virtually nothing and sold them for potentially millions in one transaction. So I agreed to it, but it didn't make it fair. So about 10 years ago, I sat down to figure out what this problem was fundamentally all about and how to make it reflect fairness as people understand fairness.
Unfair Contracts in Music and Business
00:05:17
Speaker
And people kind of have a natural understanding of when when they've been duped, when they haven't been duped. But translating into a more complicated complex business situation is sort of the color that I've added to the problem. You put your heart and soul into running a business. doesn't matter whether it's a huge conglomerate or it's a small yeah village shop type of thing. It's your business, and it becomes like a child.
00:05:44
Speaker
you know you put You would sacrifice things in order to make sure that the business is successful in the same way as you as a parent, you would sacrifice something in order to so give something to your child.
00:05:59
Speaker
this whole idea of putting all that effort, all that passion, all that commitment into something, and then realizing that you're just an employee in many ways because of the way in which the equity has been split.
00:06:14
Speaker
And listening to you, I'm thinking about people like George Michael who took his record company to court and lost, unfortunately, but it was because i knew I wanted to perform, I wanted to record my songs.
00:06:27
Speaker
I needed a record recording contract. A company offered me one. I signed it because it was a contract. As the career progressed, it wasn't a fair contract from my perspective. Prince and so many other artists have been exactly the same boat, and it is almost...
00:06:43
Speaker
I suspect the equity split thing is probably a problem that affects lots and lots of entrepreneurs, but isn't actually widely discussed. It doesn't reach the courts, it doesn't get the publicity, and the and entrepreneurs don't get the education that they need to make sure that they're protected from the sorts of issues that you've just described.
00:07:08
Speaker
Right, music is music and art is is rife with with bad deals. And especially because the musician getting into the deal has no context for making a decision.
00:07:19
Speaker
they they They don't know what a good deal or a bad deal is, they can't tell. And so the music executive who is very experienced can easily take advantage of them. But the good thing is Slicing Pie will solve that problem
Equity Frameworks in 'Slicing the Pie'
00:07:30
Speaker
too. Yeah, so tell us a little bit about there the the Slicing Pie Handbook.
00:07:36
Speaker
Well, there's two main things that I cover in the book. The first is how to allocate equity fairly using logic and facts. And the second is how to reclaim equity once somebody leaves the company.
00:07:48
Speaker
Because one of the most de disruptive things in a startup company is when someone departs the business. And it's heartbreaking to see someone leave the company and get bought out by their partners and then having them be the only people who make any money in the business at all.
00:08:03
Speaker
There's a classic old doc movie called startup.com where they invest millions of business into the startups, a documentary. And the only person who makes any money is the person who flakes out in the beginning and doesn't show up for meetings because they are forced to buy them out. So the two pieces are called the allocation framework, which is a structure for allocating equity or ownership in a project or a company and the recovery framework, which is a framework for recovering equity when someone leaves a company.
00:08:31
Speaker
Yes, because running a business is is not, it can be a lifelong commitment, but it doesn't have to be a lifelong commitment. You can pull out and you need to be treated fairly when you leave, but the people who remain also need to be treated fairly as well.
00:08:47
Speaker
Are you suggesting then, i suppose, that Someone who leaves a ah business may want to have a yeah one final cut, you finish, end every part of the relationship.
00:09:03
Speaker
But the fairer way to deal with it is perhaps to have something that is looks at the the contribution made to date and what that impact will have over the future and have not a final payment at a particular point in time, but staged payments.
00:09:19
Speaker
Well, the best way to think about it is a game of blackjack. Do you know how to play blackjack? I think we call it pontoon in the UK, but it's like you have cards dealt to you and the aim is to have cards which reach 21.
00:09:33
Speaker
twenty one Right. So it's a gamble, just like a startup is a gamble. And let's pretend we're going to play together. but We're going to play together as a team, not opponents, but as a team. And we're going to agree to split the winnings 50-50 because we're friends.
00:09:46
Speaker
So we go to the table and we each put a dollar or a pound on the same hand of blackjack. We don't know if we're going to win. We don't know how much we're going to win. We don't know how long it's going to take to win. The future is unknowable. We can't tell the future. and we're We're confident. We're excited. That's what we're playing.
00:10:01
Speaker
We can't tell the future. What do know for certain, though, is that we each bet a dollar. So the dealer deals two aces. And in pontoon, the right call is to split the aces and double down our bets.
00:10:13
Speaker
we decided to do that. But I'm out of money and you're not. So you've got two more pounds down to cover our bets. So now you bet three pounds and I bet one pound. We still don't know the future if we're going to win or how much we're going win or how long it's going to take to win. The future still unknowable.
00:10:26
Speaker
What we know for certain, though, is that you bet three and I bet one. If we win, does our 50-50 split sound fair? Not really, no.
00:10:36
Speaker
No, it should be three for you, two-thirds split. 75% for you and 25% for me. Our share of the winnings should reflect our share of the bets. That's a logical, obvious, unambiguous conclusion that we can't really argue very well. now I could say we had a deal for 50-50 and I could sue you and probably win, that didn't make it right.
00:10:57
Speaker
which's fair What's fair is that our share winnings should reflect our share the bets. And a startup is exact same thing, except instead of betting on cards, we're betting on ideas. and we bet time and money and relationships and facilities and supplies and equipment.
00:11:10
Speaker
Every day that goes by and we're not paid for our time or paid for our contributions or reimbursed for our expenses, the bets accumulate. And the value of our bet is always exactly equal to the fair market value of our contribution.
00:11:24
Speaker
So if I'm worth $50 an hour and I'm not paid for my time, every hour that goes by, I'm betting $50. So over time, those bets accumulate. And all you got do is keep track of the bets And then you know what the equity split is without
Dynamic Equity Adjustments and App Introduction
00:11:37
Speaker
any ambiguity.
00:11:39
Speaker
Yes. Yeah. See, day one, where we both got the same amount of money and we invest it on that game of cards or or into a business, a 50-50 split, it might be might make sense because we've invested the same amount of money.
00:11:57
Speaker
Once we've got the agreement, though, We should, when circumstances change, go back to the agreement. I think too many people probably don't do that.
00:12:10
Speaker
It's a dynamic agreement. So typically people do is they do it called a fixed split. They write a deal, they shake on it, they sign it, and that's the deal. And then when they realize they made a mistake, they go back to the deal and renegotiate it and make another mistake keep renegotiating.
00:12:25
Speaker
What Slicy Pie is, is it says, here's the logic of the deal. And as things change, the model, the split will automatically adjust to stay fair no matter what happens. So if you decide to work full-time and I'm working part-time, or I invest $10,000 and you invest $4,000, or I, you know, go out and do sales and don't get paid by sales commission, things change all the time.
00:12:47
Speaker
So if the deal should be based on logic and fairness and adjust based on things changing over time because we cannot predict what's going to happen. We don't know for sure what's going to happen.
00:12:58
Speaker
Yeah. Yes. I'm getting a little bit of a picture of of how this works then. but So the book, ah slicing Slicing Pie Handbook, explains the theory and I suppose how you could do it do this with a whole series of different bits of paper and and spreadsheets.
00:13:18
Speaker
But you've gone so so many stages further and developed a piece of software to help organizations deal with this as well. Right. So there's spreadsheets you can download. The concept I'm proposing is free to use. I mean, anyone can use it because it's just based on the logic of fairness.
00:13:36
Speaker
But, you know, a few years after I started promoting this book and talking about this kind of evangelizing this concept, people said you should build an app for that. So we did build an app for that. And the best way to think about it is it's an accounting app for money you don't spend.
00:13:51
Speaker
Whereas QuickBooks is accounting for money you do spend. So most entrepreneurs don't count what they don't spend. They don't even discuss what they don't spend. So you and I will start working together and we'll never discuss what our salaries are or will be or how to reimburse expenses.
00:14:04
Speaker
And because we don't have the discussion, we will be in for a rude rating when we start making real money. I talked company this morning who thought that one guy thought he was worth half a million dollars. The other guy thought he was worth about $200,000.
00:14:16
Speaker
Well, it's good to have the discussion up front. And so when money comes in, you'll know how to pay someone. But even more important, if you don't pay him what he's expecting or what he's you when he's negotiated, then those are bets.
00:14:29
Speaker
So people are used to negotiating salaries. They're used to observing prices. They're not used to negotiating equity. They can't they can't negotiate equity. You can only negotiate fair market prices. So It's good to have those things in place in the beginning.
00:14:43
Speaker
So I can see where the evangelism comes You've had the experience. You've had your fingers burnt, so to speak, and you've come up with a a solution about 10 years ago, ah solution which...
00:14:58
Speaker
works and published the book about it and then created the app this the saas solution which enable an entrepreneur to track the amount of time and money that they invest into their startup alongside their partners and that will reflect be then create um information about how a logical way in which the equity in the organization could be shared out amongst those people who are the founders, the entrepreneurs, the people who are building the business.
00:15:37
Speaker
It sounds like one of those, well, I'm really annoyed actually. It sounds like one of those things I should have thought about. Right. I get that a lot. I should have thought about it. Somebody else did.
00:15:49
Speaker
One thing you'll often overlook about business is that business is always quantifiable. We can always know the fair market value of it literally everything that goes into business. There's no intangibles.
00:16:00
Speaker
So if you want to know how much our rent is, we can look that up. If want to know how much our salaries are, we can look that up. Our taxes, can look that up. Every business that operates today, the goal and concern, theoretically keeps track of their expenses and salaries and things.
00:16:14
Speaker
So we don't have to guess what our equity split is. We don't have to pretend of what feels right or negotiate what feels right. We can know exactly what the contributions have been. And because of that, we can always determine a fair equity split.
00:16:27
Speaker
Yes. Yeah, it is. oh The key to it is having that information about all the different aspects which ah affect the value of the business.
00:16:39
Speaker
You've reeled off quite a list there of things, but in my experience of dealing with lots of entrepreneurs um they don't collect that information they don't record it it's like you say they're only interested in things that they're spending and when they put money into their business or they pay the payroll from their savings rather than from the business it doesn't always get accounted in the right way you know because they'll get around to it get around to it or I don't want someone to know that the money had to come from my my own account in order to finance this or I use my credit card to pay for this.
00:17:18
Speaker
ah it It gets lost um and part of that is administrative, you know not being organized enough to make to record all the right information.
00:17:29
Speaker
There's also an element of pride as well. I think people don't necessarily want to have to admit that they've invested or they've covered the cost of something for their business from their personal money, which unbearable.
00:17:44
Speaker
It's not just taking money from your account. It's invest that money is then invested into the business. So would affect the, your equity in that business and would balance, you know, be reflected in any ownership split should at the time when organizations go public or sold or somebody leaves the organization.
00:18:05
Speaker
Are people shooting themselves in the foot sometimes? Right. mean, if you spend thousand dollars on a plane ticket and there's not, it's not reimbursed, you just bet a thousand dollars. If you buy coffee paper for the coffee machine and you spend $5, you've just bet $5. If you spend 10 hours of work at $50 an hour, you just bet $500 unpaid salary.
00:18:26
Speaker
Once you see it context of bets, it makes perfect sense to keep track of your bets. If you have the blackjack table with your friends, you're going to keep track of your bets. So can split the weddings up at the end of the night. Yeah. It's really as an entrepreneur,
00:18:40
Speaker
Yeah. i'm Sorry, say that again, please. so There's nothing new to track. you're not you know Most companies track payroll. Most companies track expenses. There's nothing new to track. It just gets in the habit of having some good discipline around it.
00:18:53
Speaker
Yes, yeah. Good discipline around accounting for the money that you are spending on your business and the value of the time that you spend on the business as well. Because if you're working and not being paid, your reward will come in the equity split.
00:19:10
Speaker
Or if you're taking less in salary than the current market rate for someone doing your job, that also needs to be recorded and shown in the equity split as well.
00:19:22
Speaker
So part of your salary is a bet. and Part of your salary is not a bet if you're getting paid part of it, that part's not a bet. Yeah. And you're asking about recovery.
Rationales for Leaving Startups and Equity Consequences
00:19:33
Speaker
Yes. So there are four reasons why someone could leave a company. They could be fired for good reason, which means they did something so negligent that it's clear they should be fired, like they brought a gun to work or sexually harassed somebody or embezzled.
00:19:46
Speaker
Or more likely, they weren't performing on the job, which is more common. And in that case, you have to give someone, I call it warning, warning, fire. If you give someone a warning to correct behavior and they don't correct their behavior, then you can fire them for good reason.
00:19:58
Speaker
You can also fire them for no good reason. means you didn't give them a warning. They didn't do anything negligent. You just decided to fire them. The third reason is you can resign for good reason. Resigning for good reason implies that the company made promises that it couldn't keep.
00:20:13
Speaker
So I might tell you, I'll pay you a salary in six months. Six months comes around, no salary is paid. You have good reason to resign. Or we're based in London, pack your bags and move into Seattle. It's you sign up for.
00:20:24
Speaker
So you have good reason to resign. The last reason is you just quit for your own reasons. You just resign for no good reason. You're just leaving them in the lurch. So if you are solo entrepreneur and you quit working on the job or you're not performing on the job, you lose everything, right?
00:20:40
Speaker
Yes. Same applies in Sliceify. If you are fired for good reason or you resigned for no good reason, you lose your slices for what i call non-cash contributions. And any cash you put in, it was returned to you later as a loan.
00:20:52
Speaker
So it's painful to leave under those circumstances, as it should be. If you want to play this game, don't quit. Don't get fired. on the flip side, if you are fired for no good reason or you resigned for good reason, your your bet stays on the table and you get paid equity but but when everyone else does.
00:21:09
Speaker
So it's just like the blackjack game, just like the pontoon game. If you get up in the middle of game and walk away, you're walking away from your bet. So the casino is going to chase you down and pay you back.
00:21:19
Speaker
They're going to just keep your bet. So it did those are logical outcomes to ah decisions people make along the way. So no matter what happens, if people work part-time or full-time or quit or stay, whatever do they do, slicing pie always adjusts to accommodate that situation and stay fair.
Entrepreneurship as a Gamble
00:21:37
Speaker
Yes. mean, when you started with the casino blackjack pontoon analogy, I was thinking like, yeah, but actually the way in which you described it, yes, setting up a business is a gamble.
00:21:51
Speaker
You don't know whether you're going to be able to pay your bills. You don't know whether the income will come from, the comps will come from. It's a gamble and we need to see it in that sort of way. You don't want to look at job.
00:22:04
Speaker
Yeah, precisely precisely. If you don't want to gamble, don't sit down at the table, don't get a job go get a job instead. If you lose your nerve halfway through the game and walk away, then the casino will keep your money.
00:22:18
Speaker
You can't withdraw the money that you've bet until the end of the game. it's ah It's a very good analogy. And- It does make you think as an entrepreneur that somebody who has set up a business does make you think about how much time, energy, effort you've put in and what that's worth as well as the the money that you've put in and and how that would be reflected in a and share ownership when it comes time to ah public, sell um or even close the business down.
00:22:53
Speaker
It's some yeah certainly made me think there. Certainly made me think. Slicing pie is used from the concept stage and you when you first start in earnest to build your business all the way through your first round of major funding or break
Using Slicing Pie Until Major Milestones
00:23:09
Speaker
even.
00:23:09
Speaker
Because at that point, if you're if you're well-funded, you can start paying people's salaries and paying their expenses and the pie naturally stops accumulating bets. Yes. Then you move to regular check-out split.
Conclusion and Further Resources
00:23:21
Speaker
yes i get the feeling mike that we have simply scratched the surface of everything that is included in the book slicing the pie slicing the pie handbook um it's certainly going to be worth a very good read we'll put a link in the description so that people can do that and also a link to investigate the app that you've developed as well but uh For the moment, I'm sure we will talk again, but for the moment, Mike, I'd really like to thank you for helping me make such an interesting episode of The Independent Minds. Thank you very much.
00:23:55
Speaker
You're welcome. Thank you for having me. i appreciate it. It's been great. Thank you. I am Michael Millward, the Managing Director of Abucida, and I have been having a conversation with the independent mind, Mike Moyer from Slicing Pie.
00:24:10
Speaker
You can find out more about both of us at abucida.co.uk. There is a link in the description. I must remember to thank the team at matchmaker.fm for introducing me to Mike.
00:24:23
Speaker
If you are a podcaster looking for interesting guests, or if like Mike, you have something very interesting to say, matchmaker is where matches of great hosts and great guests are made.
00:24:35
Speaker
There is a link to matchmaker.fm and an author code in the description. The description is really worth reading. If you'd like this episode of The Independent Minds, please give it a like and download it so that you can listen anytime, anywhere.
00:24:52
Speaker
To make sure you don't miss out on future episodes, please subscribe. And remember, the aim of all the podcasts produced by Abbasida is not to tell you what to think.
00:25:03
Speaker
But just as Mike has done today with me, we hope, we do hope to make you think. Until the next time, thank you for listening.
00:25:14
Speaker
Goodbye.