Ownership vs Stewardship — A New Paradigm Approach to Equity and Dynamic Contribution
In the last article we talked about how, as resource is being drawn up into the roots of a really nascent organism, you ideally want the organism to be channeling that resource flow:
(A) Into a clean, appropriate and open receptacle; and then
(B) Through the organism to the best and most energy aligned places that are nourishing it to the maximum and allowing it to flourish into a healthy seedling (and ultimately keep growing into a vibrant fruit-bearing tree).
So let’s assume step one is in the works…..
You’re setting up a new local bank account (you may also have an international one but the local one will support you with your day-to-day transacting), that’s got a big enough capacity to receive the resources you’re anticipating could come in, and you’re considering the matter of all joint owners being authorised on the account for the purposes of being able to make financial decisions.
At this point it would be natural if that last piece is raising some questions for you.
Because what if the equity split isn’t equal, and some people feel more responsible for or aware of the finances in the group than others?
What if some people have put more into the business in terms of time, energy or resources and have their finger more on the pulse than other members of the team do?
Does that still mean everyone should have joint access to the bank account, and equal ability to spend money from the business?
All these are really valid questions, and truthfully there’s no right or wrong answer to them, but it’s also useful to enter this territory with our eyes wide open by unpacking the potential ramifications of the decisions we make in these areas.
So let’s get to talking about the topics of 𝐄𝐐𝐔𝐈𝐓𝐘 and 𝐎𝐖𝐍𝐄𝐑𝐒𝐇𝐈𝐏.
At the early stages of a new business, before the team is at a place for a physical agreement to be signed, it’s not unusual for verbal agreements to be innocently entered into based on the initial roles that are emerging within a group.
More often than not, the group feels a sense of urgency to ensure that ownership is divided out so that:
(a) something is already in place when the money that’s anticipated to land, does land; and
(b) everyone can feel like they’re investing their energy and attention into something that is also going to take care of their own needs.
And I get it.
Sometimes it can really feel like there’s pressure externally to get things sorted so that the money can land.
And, there’s a chance that our first instincts on this are spot on with the equity split, everyone in the team is happy with how things have been divvied out into perpetuity (even once an agreement has been signed) and the balance of contribution stays in alignment with that throughout the lifetime of the organism.
But, more often than not, it doesn’t quite happen that way.
You only need to look at the statistics around startup failure to see how prolific co-founder conflicts around equity and IP are in the startup world.
This may be, at least in part, due to the fact that more often than not peoples’ contributions to a business shift and change as the organism shifts and changes. Because what we start out doing right at the beginning, is rarely what the individuals or team end up doing months or years down the line, because adapting and pivoting to meet Life’s circumstances is such an intrinsic and necessary part of the startup journey.
That process of adapting and pivoting may well call upon the different gifts and skill sets of the different members of the team at different stages of the journey, which might completely tip the landscape of contribution and have the silver ball of your collective focus rolling to the totally opposite side of the attention board.
But because we feel external pressure to get clarity around this so that money can land, we end up leaping into trying to articulate the equity split early, putting the stake of our ownership claims in the ground, at a stage when the organism potentially hasn’t yet formed enough to reveal what it’s really meant to be.
And there are totally understandable reasons why we do it.
There are all sorts of unconscious energetics and conditioned patterns that are wrapped up in those conversations that we’re not necessarily aware are playing out under the surface.
For one, money goes straight to our root chakra and our feeling of security. When it comes to the topic of money, and with it: equity and ownership, expenses and loans, legacy and family, it’s not unusual for human beings to feel wobbly because it goes right to our base survival needs.
That’s why, energetically, it can put us in a fight or flight response to even talk about money sometimes.
So when it comes to entering into a collaborative endeavor, at the root chakra survival level we may not yet feel able to fully let go and trust that we can just pour in our energy and attention into the organism unconditionally, perhaps because of previous painful experiences that we’ve had around partnership or collaboration, or because we’ve been warned by our families not to trust people when it comes to financial matters (because perhaps they’ve had painful experiences in this regard).
Given how possessive and legally trigger-happy people can get over their visions or any alleged IP, it’s no great surprise that so many of us feel scared to be contributing to something without knowing how or how much we’re going to be compensated, so that we feel like we can trust it and not have to worry about being screwed over.
This inevitably leads to us wanting to get clear about ownership and apportioning values to roles and, if we’re not aware that these unconscious patterns are playing out under the surface, then the discussions and arrangements we’re having around equity allocation in these early stages are often riddled with mistrust based on a need to secure our position due to fear and insecurity.
Now, to offer a contrasting example, I want you to imagine if we did that same thing during a pregnancy.
Imagine if each partner was like,
“𝑊𝑒𝑙𝑙, 𝐼 𝑜𝑤𝑛 𝑡ℎ𝑖𝑠 𝑝𝑜𝑟𝑡𝑖𝑜𝑛 𝑜𝑓 𝑜𝑢𝑟 𝑢𝑛𝑏𝑜𝑟𝑛 𝑐ℎ𝑖𝑙𝑑, 𝑏𝑒𝑐𝑎𝑢𝑠𝑒 𝑚𝑦 𝑖𝑛𝑡𝑒𝑛𝑡𝑖𝑜𝑛 𝑖𝑠 𝑡𝑜 𝑠𝑒𝑟𝑣𝑒 𝑡ℎ𝑒 𝑟𝑜𝑙𝑒 𝑜𝑓 [𝑥] 𝑖𝑛 ℎ𝑖𝑠/ℎ𝑒𝑟 𝑙𝑖𝑓𝑒, 𝑎𝑛𝑑 𝐼 𝑤𝑜𝑢𝑙𝑑 𝑡ℎ𝑒𝑟𝑒𝑓𝑜𝑟𝑒 𝑤𝑎𝑛𝑡 𝑡𝑜 𝑏𝑒 𝑎𝑏𝑙𝑒 𝑡𝑜 𝑚𝑎𝑘𝑒 𝑑𝑒𝑐𝑖𝑠𝑖𝑜𝑛𝑠 𝑎𝑏𝑜𝑢𝑡 [𝑥]% 𝑜𝑓 𝑤ℎ𝑎𝑡 ℎ𝑒/𝑠ℎ𝑒 𝑒𝑎𝑟𝑛𝑠 𝑔𝑜𝑖𝑛𝑔 𝑓𝑜𝑟𝑤𝑎𝑟𝑑𝑠.”
(a) the child isn’t even born yet;
(b) you don’t own your child; and
© You don’t divide up percentages of your child and only put in the effort based on the security you feel around your percentage ownership of him or her.
Hopefully you recognise that God has gifted you a child for you to love, nurture and responsibly steward its growth.
And ideally, for a child to have a secure upbringing, each parent takes full responsibility for that child, and pours everything that they have into it while it’s growing into becoming a self-sustaining being.
𝐓𝐡𝐞 𝐬𝐚𝐦𝐞 𝐚𝐩𝐩𝐥𝐢𝐞𝐬 𝐭𝐨 𝐲𝐨𝐮𝐫 𝐠𝐫𝐨𝐮𝐩 𝐜𝐫𝐞𝐚𝐭𝐢𝐯𝐞 𝐞𝐧𝐝𝐞𝐚𝐯𝐨𝐮𝐫.
From one lens it’s fair to say that until the organism is generating something, or is valued by someone 𝑒𝑥𝑡𝑒𝑟𝑛𝑎𝑙𝑙𝑦, then no one really owns anything yet because nothing with any 𝑒𝑥𝑡𝑒𝑟𝑛𝑎𝑙𝑙𝑦 𝑟𝑒𝑐𝑜𝑔𝑛𝑖𝑠𝑒𝑑 𝑣𝑎𝑙𝑢𝑒 is actually manifest yet.
The baby is still very much in the womb.
And if you were actually pregnant with a baby in the womb, the first thing you’d likely be considering is that any and all resource goes unconditionally to support the health of that womb space, to resource the organism.
As such, at the beginning stages, it can be helpful to be looking less at what you can 𝑡𝑎𝑘𝑒 from the organism, and more at what you can 𝑔𝑖𝑣𝑒 to it.
Like an unborn child, imagine unconditionally pouring all your resources into the centre.
In reading that there may be some of you thinking:
“𝒀𝒆𝒂𝒉, 𝒕𝒉𝒂𝒕’𝒔 𝒘𝒉𝒂𝒕 𝒘𝒆’𝒓𝒆 𝒅𝒐𝒊𝒏𝒈.
𝑬𝒗𝒆𝒓𝒚𝒕𝒉𝒊𝒏𝒈 𝒕𝒉𝒂𝒕 𝒆𝒗𝒆𝒓𝒚𝒐𝒏𝒆 𝒉𝒂𝒔 𝒊𝒔 𝒃𝒆𝒊𝒏𝒈 𝒑𝒐𝒖𝒓𝒆𝒅 𝒖𝒏𝒄𝒐𝒏𝒅𝒊𝒕𝒊𝒐𝒏𝒂𝒍𝒍𝒚 𝒊𝒏𝒕𝒐 𝒕𝒉𝒊𝒔 𝒕𝒉𝒊𝒏𝒈.”
Maybe you’re all living together while you’re creating together, and you already have a very simple, baseline understanding or agreement (before you get to the sacred act of initiation of your first written agreement) that when money comes in it goes toward paying for the house and food first so that the womb space is taken care of first and foremost.
Which is great.
AND often the kind of habits I’m speaking to sneak in unconsciously.
For example, quite innocently new startup founders will be hanging out and excitedly chatting about how much they are each going to walk away with from their collective endeavor;
Maybe they’re hoping for, say, a million dollars each in the first year as an example.
What we often don’t realise is that putting that into words is tantamount to saying, during your pregnancy, that you want your baby to financially look after you as it’s parents at 3–6 months old by making you￡[x]million (and you’re saying it before it’s even birthed out of you).
And that’s A LOT of pressure and expectation to heap onto something that’s not even manifest in form yet.
So the invitation here is to consider taking an orientation toward your nascent business as if you’re the excited parents to a fertilized egg in your collective tummy.
You know how oftentimes the mother doesn’t usually talk about it for the first 3 months because it’s still so tiny and nascent, and not fully formed or cresting its way into reality yet?
Well, this is like you and your group……..
……you’re still becoming the trusted recipients that are demonstrating that you can receive and bring what you’re creating into form and as such, it’s helpful to ease any expectations that you might accidentally be heaping onto your foetus.
And, just for sh*ts and giggles (and not because there’s anything wrong with apportioning ownership or equity early on per se), I’m curious how it feels to try on the feeling of 𝚘𝚠𝚗𝚎𝚛𝚜𝚑𝚒𝚙 vs the feeling of 𝕤𝕥𝕖𝕨𝕒𝕣𝕕𝕤𝕙𝕚𝕡?
Because with 𝚘𝚠𝚗𝚎𝚛𝚜𝚑𝚒𝚙 you may notice that there is a conditioned sense that if I have something, it’s mine, it’s my possession, and therefore it’s not yours. There can be a felt sense of a closed orientation around the object of ownership in a way that makes it no longer available or accessible by others.
Whereas 𝕤𝕥𝕖𝕨𝕒𝕣𝕕𝕤𝕙𝕚𝕡 has a more open orientation; it’s like the object of our attention that we’re stewarding is open and free, and we’re simply here to responsibly and lovingly guide and nurture its growth and development by example.
Taking an orientation of 𝕤𝕥𝕖𝕨𝕒𝕣𝕕𝕤𝕙𝕚𝕡 doesn’t necessarily have to denote equality of contribution amongst the group (although there are certainly added benefits to everyone being willing to take the level of responsibility that a parent takes for a child which we’ll likely cover in another article) nor does it have to correlate to compensation, income or equity.
And bear with me, I’m coming to address those elements shortly.
The invitation here is simply to release the iron grip that we tend to have on equity as something we typically clamp around, divide out, or have clearly delineated about what’s “mine” at the front end so that our ownership is secure and things feel fair.
And to entertain a more open-hearted and open-handed orientation to the nascent organism in the early stages; a recognition that we’re collectively stewarding it with our team mates and a faith in the highest possibility that we can be holding it in, that as the seed naturally grows from the intentional culture that you and your team are putting your attention on, it’ll be overflowing, generating abundantly for all who are contributing to responsibly stewarding it.
From that kind of open orientation, we can then revisit the topic of equity from a different vantage point.
As we touched upon earlier in this article, there’s nothing wrong with apportioning equity based on how everyone is showing up in the early stages of your organism’s growth, but if equity is fixed, and resource is primarily being allocated through dividends, and then all of a sudden the organism is required to pivot and the landscape radically shifts, requiring totally different skill sets to come to the forefront, this is where tensions can all too easily arise and risk derailing the relationships between the founders.
This is why, in an ideal world, anything related to resource flow within your organism would be 𝐃𝐘𝐍𝐀𝐌𝐈𝐂.
Because if resource flow is fixed, maybe based on fixed equity (and dividends), the market value of a role, or a title or experience, then no matter how anyone is showing up in any given moment, or how much their gift set is required or not, they receive a fixed amount.
But if resource flow is dynamic then resource allocation can be reflective of the energetic contribution that’s actually going into the organism by each person, where the energy is actually being contributed real-time, ensuring it flows to the best and most energy aligned people who are nourishing it to the maximum.
So let’s explore what that could look like in practice…..
One possibility is that, instead of correlating to equity, any money that you and your teammates initially put into the organism is considered a business loan that’s repayable at a particular rate of interest once the organism is profitable.
Which means that everyone starts with zero equity and by pouring your attention in and engaging in peer-to-peer contribution ratings over time, say, until the organism is actually profitable, the equity is then earned incrementally based on contribution.
Another possibility is that your equity, or percentage ownership, isn’t used as the primary determinant of your co-founders’ income.
Sure, there are some tax considerations to this piece, in that dividends are, for the most part in most first world countries, taxed at a lower rate than salaries or bonuses; but it’s worth contemplating.
Instead of dividends being paid out to the owners periodically or at the end of the year:
(i) they could be put back into the organism to fuel its growth and development; and/or
(ii) minimum or lower base salaries could be paid and any additional earnings over and above that could be distributed as a bonus bi-weekly or monthly based on actual real-time contribution revealed by peer-to-peer ratings
In this case, the equity portion would still be relevant upon a sale of all or part of the business organism, as the key determinant of what the value is on the sale of the part, or what proportion of the sale price each equity holder would get on the sale of the whole, but on a day-to-day basis, income levels could be tied primarily to contribution through compensation.
That’s one option, but alternatively, you could make equity dynamic too.
So peer-to-peer ratings could be happening, providing data around contribution and participation, at any point after the organism’s inception up to the signing of the Operating Agreement. The mean average of the ratings over that period could then determine the equity (or be considered as one of the factors determining equity) at the point of signing.
Or beyond for that matter, if that feels more authentic to you.
If you elect for equity to be dynamic, then my suggestion would be that you crystallize the equity upon signing the Operating Agreement for a defined period, say one year, on the express agreement that at the one year mark the equity proportions will be reviewed and amended based on the monthly peer-to-peer average ratings over the previous [x] months.
That way, people can’t just rest on their laurels on the basis of holding an initial large equity stake, and if it’s clear that the peer-to-peer ratings have been telling a different story after the signing happened, then you have the ability to come back to your equity allocations and adapt them to be reflective of more real-time energetic contributions of your partners.
That way, if someone is no longer contributing (or leaning out as we like to say in my team) or they are suddenly contributing significantly more with continuity over time, this can be accurately depicted and there’s the ability for the organism to dynamically recalibrate to that both in terms of equity AND compensation.
Ultimately, it’s about the participants being in right relationship with each other and with the organism, in as real-time as possible, and for the resource flows to mirror that accordingly.
So if you’d like support in coming into alignment around equity allocations and compensation so that resource flow is dynamically following energetic contribution, or you’re interested in how you can start to implement peer-to-peer ratings, DM me for an exploratory connection call for how I can support you.