Hello Everyone, I'm curious if anyone here has used the Slicing Pie method for structuring equity ownership in a Search Fund. I just learned about this model and I love the concept. To be fair, this is a 'startup equity calculator' concept, but I see it as a great way to dynamically adjust ownership based on the factors in the model the suggest. If you're interested in learning what this is, the website is slicingpie.com.
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The problem with using this approach for search funds is that the kinds of businesses that SFs can target are varied and this idea may not always translate well. For example, in real estate private equity, acquisition-related skillsets are more highly valued than asset management skillsets, and so GPs / dealmaker types usually get more equity than Operating Partners / asset managers, even before any deals have been done.
Even within software (especially where search funds are concerned), it's not always a given that both types of founders should have an equal equity split - it's easy to justify startup engineering leaders getting equal equity since there's no business without building the product, but what about in software PE, when the target business is already established and most value comes from operational, not technical, improvements?
In a nutshell, slicing pie is an interesting way to consider distributing equity between founders / partners, but 1) searchers should recognize the underlying beliefs that inform the calculator may not always be in line with investor expectations in different spaces and 2) ultimately, equity splits should be predominantly guided by how much value each party will bring to the table.