How to Split the Pie When There Is No Pie Yet

About three times a week I have a conversation that goes “Lyokha, I remember you said something about…” — and then anything at all. About hiring, about negotiations, about team structure. This time Andrey came along and said: “I remember you said something about options. Let’s get on a call and you’ll explain it to me. I’ve got two stories — in one I want to take an option, in the other to give one.” So we chatted away for an hour and a half. Then I thought: why let it go to waste? But since I have a healthy impostor complex, I double-checked everything — turned out that on the whole I’d said it right. So here you go.

What this is about

You’ve decided to build a project together. A game, a service, a product — doesn’t matter. There’s no money. Or there is, but not much. How do you split the future success? Andrey had exactly two situations: he’s being offered a share in someone else’s project, and he himself is thinking about how to motivate people in his own. It turned out to be the same task, just from opposite ends.

Why this matters at all

It seems like the answer is simple — agree on it. Sit down, talk, shake hands. We’re friends/partners/professionals, after all. But there’s a pattern I’ve seen several times — both in my own projects and from the outside. It kills businesses.

Here’s what it looks like. Vintik, Shpuntik and Ponchik decided to build a rocket. At the start they agreed: we split everything equally, 33% each. Shook hands, hugged it out. Six months go by. Vintik and Shpuntik are grinding away in the workshop 60 hours a week. And Ponchik… well, Ponchik has things going on. He drops in once a week, gives some advice and leaves. Maybe he has other priorities. Maybe he overestimated himself. Doesn’t matter. Vintik and Shpuntik see this. And they start getting angry. Because Ponchik has the same share as they do, but he isn’t earning it.

Then comes the fork in the road.

Variant A: We put up with it. Vintik and Shpuntik lose their faith that effort means anything. Why grind if Ponchik gets the same? The ownership structure starts working against the interests of the enterprise.

Variant B: We shove Ponchik out by the unwritten code. We say: look, you’re not working, let’s part ways. But in doing that we undermine the belief that ownership is ownership. Everyone thinks: “They shoved him out — so they can shove me out too.”

Both variants lead to the death of the project.

According to research, 73% of teams split the shares in the first month after the start. When nothing is clear yet: who’s going to work how much, who’s going to pull it off and who isn’t. And most of them regret it later.

The principle: ownership must serve the structure

There’s one thought that has helped me a lot: “Ownership must work for the structure, not the other way around.” What does that mean? The ownership structure should reflect the interests of the business’s development as a system. Of course, in the end the business serves the interests of its owners — people own the business, not the business people. But if we want the system to be healthy, both requirements have to be met. When the shares are fixed at the start and never change — that often leads to lousy organizational design. The ownership structure starts working against the interests of the enterprise. Options are exactly the instrument that lets you make shares dynamic. You don’t get the ownership right away. You get the right to ownership if you fulfil your part of the deal. This protects both sides:

• The company — from the situation “we gave out a share and the person doesn’t work”
• The person — from the situation “I grinded away and got nothing”

But there’s a catch. An option protects you only after it has vested (more on that below).

How to count contribution: three types of capital

Okay, shares should reflect contribution. But how do you measure it?

There’s a method I use — the Grits calculator. It was developed by Dmitry Grits, a lawyer specializing in business partnerships, on the basis of supporting more than a thousand partnerships.

The idea is this: the whole contribution is split into three types.

1. Economic capital — real money. You put in 100 thousand — that’s 100 thousand.

2. Human capital — time and competencies. How many hours you work, what the “market price” of those hours is.

3. Social capital — connections, reputation, access to resources.

Then you sit down and agree: so what matters more for our project?

Here’s how it works. Imagine Vintik and Znayka discussing a rocket launch. Znayka says: “80-10-10. Money is the main thing. Without money for materials the rocket won’t fly.” Vintik replies: “I’d say 40-40-20. Money matters, but without somebody who knows how to build rockets it’s useless.”

This isn’t a right answer and a wrong answer. It’s a basis for negotiation. For the calculation you can use the Grits calculator.

How it works in practice

Let’s get back to our shorties. Vintik, Shpuntik and Ponchik agreed on the shares with the help of the Grits calculator. Let’s say it came out 40-40-20.

But shares are one thing, and real work is another. How do you make sure everyone is putting in their contribution?

The answer: regular check-ins.

You already have the usual agile rhythm: planning, work, retro. The check-in on shares is part of the retro.

Once a month (or once a sprint) the team gets together and asks itself: has everyone met their commitments?

A sample dialogue:

Vintik: I promised to finish the engine — I finished it. Here it is. Shpuntik: I promised the body — it’s 80% done. Didn’t get to the landing gear, moved it to next month. Ponchik: I… was thinking about supply. Vintik: Thinking or doing? Ponchik: Well… mostly thinking.

Then comes the fork in the road. Either Ponchik says: “Yeah, I screwed up, I’ll catch up next month” — and the team accepts that. Or it repeats three months in a row, and then one of the partners says: “Looks like the vesting condition should be not just the time served, but meeting your commitments. The option vests if you do what you promised.” This is the key thought: vesting isn’t only about time. It’s about keeping the agreements. “At the end of the month everyone gets together like: well, do we reckon everyone met their commitments, or did somebody not meet theirs?” The more regular the check-ins, the better. Once a month is fine. Once a quarter works too. Why this matters: without a salary there’s no event that fixes that the contract is still live. The check-in is exactly that kind of event.

The protection mechanics: vesting and cliff

Now we know how to count who gets how much. But what if Ponchik leaves in a month? Or stops working altogether? For that there’s a mechanism called vesting. The essence is simple: you don’t get your share right away. It “ripens” gradually. The typical scheme: 4 years of vesting with a one-year cliff. Cliff is a threshold. For example, you agreed that in the first year nobody gets anything. At all. If you left before that term was up — you get squat. A year isn’t the law. It’s what you agreed on. It can be six months, it can be three months. The main thing is to talk it through in advance. After the cliff the share starts “dripping in” — usually monthly or quarterly.

What vesting gives you:

For the company: if a person isn’t pulling their weight, you can part ways before they get the share.

For the person: if you’ve put in the time, the share is yours. Once something of yours has vested, from that point on it’s not an option but a small piece of ownership. They can’t take it back.

An important nuance:

An option protects you only once it has vested. Before that it’s just an obligation to give you a share if you keep being useful. Until that moment the company can fire you — and you’ll walk away with nothing. That’s an asymmetry worth remembering.

What an option is, in plain terms

Let’s go through it once more, dead simple. An option is the right to buy a share in a company at a price agreed in advance. Not the share itself. The right to buy it.

Let’s say today one “share” in the Society of Giant Plants costs 1,000 santiks. Neznayka is given an option on 100 shares at that price. A year goes by. The company has grown a giant cucumber and become famous. Now a share costs 5,000 santiks. Neznayka can buy his 100 shares for 100,000 santiks (the old price). And they’re already worth 500,000. Profit — 400,000. Or he can say: “I don’t have 100,000.” Then the company can buy out his right and pay the difference. The specific mechanisms depend on the terms of the agreement — it’s all spelled out in the contract.

How to roll this out in one evening

All of this sounds sensible. But how do you do it in practice if you have no lawyer and no budget for the paperwork? Good news: you can start with “lads’ agreements.” You simply agree that the principle you’re using is options. These options exist on lads’ agreements. It’s not a legal document. It’s a moral contract. But it works if everyone understands the rules.

Step 1: Agree on the shares

Use the Grits calculator or just sit down and discuss: who is putting in what, what matters more for the project.

Step 2: Agree on the rhythm

How often do you check in? Once a month is the minimum. What do you discuss at the check-in? Whether each person met their commitments.

Step 3: Agree on the consequences

What happens if someone systematically fails to keep their promises? First — a conversation about behavior. Then — a possible revision of the shares. Talk it through in advance.

Typical situations: what if…

Let’s say you’ve set it all up. But life is more complicated than any system.

What if Ponchik leaves on his own?

Depends on how much has vested. Left before the cliff — gets nothing. Left after — gets the vested part.

What if Ponchik is asked to leave?

That’s trickier. “Grown-up” option agreements have the concepts of “good leaver” and “bad leaver”.

Good leaver — left through no fault of his own (layoff, illness). Usually gets what has vested.

Bad leaver — left through his own fault (didn’t work, breached the agreement). May lose everything.

This is standard practice from the venture world, worth discussing with a lawyer when you get to formalizing things.

When to go to the lawyers

Lads’ agreements are an excellent start. But sooner or later you have to formalize it all in a grown-up way.

Signs that it’s time:

• Real money has appeared (investment, revenue)
• The team has grown past 5 shorties
• Somebody wants to exit and lock in their share
• An external partner has appeared (a publisher, an investor) who is putting in serious resources

Is it worth asking your employer for an option

This was one of Andrey’s questions: he’s being offered a job, and he’s thinking — is it worth asking for a share?

The first thing to understand: options are not an instrument for every business. They make sense where there’s potential for a multiple increase in the company’s value. A startup that can grow 10–100x — yes. A stable business with linear growth — probably not.

Second: most companies are not legally set up to issue options. It’s quite likely that the outfit inviting you is not arranged in a way that makes giving options possible.

Especially in Russia. Almost all startups that give options are registered in other jurisdictions — Cyprus, the Netherlands, the US, Ireland. (Legal instruments for options have recently appeared in Russia, but it’s a very rare and exotic practice.)

What to ask a lawyer:

Here’s a concrete checklist:

• What types of options are there?
• What practices protect the employee’s side?
• What practices protect the company’s side?
• What are the typical clauses in the contracts?
• How should they be interpreted?
• And without fail: what jurisdiction the company operates in.

What to do right now

1. If you’re being offered an option/share:
   • Find out the vesting terms (period, cliff, granularity)
   • Ask what happens when you leave (good/bad leaver)
   • Check the company’s jurisdiction
   • Ask to see the option agreement before signing
2. If you’re putting a team together:
   • Agree on the shares (use the Grits calculator)
   • Set up regular check-ins
   • Talk through what will happen if somebody doesn’t meet their commitments
   • Put the rules down in writing (even without a lawyer)
3. In both cases:
   • Have the first conversation about shares this week
   • Don’t put it off — 73% of teams split early and regret it, but 100% of teams that don’t split at all regret it even more