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I am about to conclude my Ph.D. work. The research has led to a possible commercial product which I always pushed. So now, after four years of work, we've filed four patents with three already granted. A year and a half ago, the PI moved to another position, so now I communicate my progess once a month).

I developed the scientific product along with software, electronic hardware, web apps, and so on, not to mention journal papers on the way. The technology is promising and we have businesses interested and willing to invest. Along the way we got a part-time master's business student, who supports us when we have to write proposals and do interview calls and meeting possible business leads. I always join those meetings and often take decision on what should be the way and what is achievable.

Now we are on the verge of legally founding the company and possibly soon begin sales.

My dilemma is finding out what share of the company is fair for me.

The partners in the business would be me, the business student, and my PI. (I think the PI should get a fair share; after all, it was research done in her lab, however I have seen opinions saying this should be no more than 10 percent.)

Of course, on the way, there were master's student with whom I worked and taught them the lab work and tricks and all that I could to have them their work done in timely manner, also I offered them opportunity to be part of startup but they were not interested.

I don't want it to be a quarrel but also don't want to feel exploited. If I leave there is no one on the team who understands how the technology works, or how we can produce with alternative methods (I might be overestimating, but this stuff I did for my PhD and mostly it would be another PhD who could do it. It is countless hours of labwork.) I am a co-inventor along with PI on all the patents filed/granted.

Please help me out in figuring what share of the company I should expect.

closed as off-topic by user9646, Fomite, padawan, user3209815, jakebeal Mar 19 '18 at 12:02

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  • "The answer to this question strongly depends on individual factors such as a certain person’s preferences, a given institution’s regulations, the exact contents of your work or your personal values. Thus only someone familiar can answer this question and it cannot be generalised to apply to others. (See this discussion for more info.)" – Community, Fomite, user3209815, jakebeal
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    The advice about see a lawyer or attorney is priceless in this situation - verbal contracts between friends can be fine until it goes wrong... – Solar Mike Jan 9 '18 at 7:20
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    What is fair is 100% minus whatever you agree in writing with the other parties. As what they expect is outside of your direct control, that requires negotiation and at least one lawyer to draw up an agreement you all accept. If there is a dispute the other parties need their own lawyers. An experienced lawyer is a requirement, not an option. But what you consider fair does not mean you will get that - don't lock yourself mentally into the mindset that you can decide what is fair and everyone else should be OK with it - that way lies trouble. – StephenG Jan 9 '18 at 8:25
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    Many institutions have an office dedicated to helping members with the legalese of founding a spin-off company. You should check with them. They can also advise on IP issues. Many universities have IP rules to prevent such conflicts. – Cape Code Jan 9 '18 at 8:44
  • What location is this? Sweden has a teacher's exemption that says that universities do not own the IPR of the academics they employ, but in many other locales the university will ask for a share (apparently up to 20% or 30%). Note that "the professor" and "the university" are different entities. – xLeitix Jan 9 '18 at 10:10
  • Or just pay her out at some point and take 100% of shares – user85631 Jan 9 '18 at 10:56
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TL,DR: You deserve a large majority. I consider 90% for you and 10% for your professor fair.

I finished my Ph.D. and co-founded a company based on dissertation work. I continue to work as a funded tech entrepreneur. I offer the following insights:

  1. From your situation, it sounds like no one else is remotely close to your level of contribution. If you leave, there is no business.

  2. Equity should be determined based on real contribution to the enterprise. You aren't being cruel or disrespectful by placing a value on what people bring to the table. At this point of the business, value equals cash or know-how. Do not award equity to someone who's really eager and ready to "work like a dog" (chances are they will fade in six months) without tying their effort to a vesting period -- they don't receive their equity until after a period of satisfactory work, quantified and agreed-to in writing.

  3. As co-author of the patents, your professor is entitled to proceeds from the use of the intellectual property, but not equity. In this case, you are choosing to give equity in exchange for permission to use the patent. Your business operating agreement should state that.

  4. You need to check the university guidelines regarding use of the patent. Most likely, the patent is controlled by the university and you'll have to work out a licensing agreement.

When all is said and done, you need to have enough cushion to absorb dilution (if you bring on investors or high-level staff), yet retain control or a profitable equity position. I think a 90%-10% split between you and your professor is about right at this point. If you bring on the business student (they may be a nice person, but aren't providing a lot of value), I propose a 85%-10%-5% split with a vesting period for the student. Consider awarding more equity to the student later if they work hard.

Good luck and remember: you have the know-how if people decide to make things difficult. Walk away if needed.

  • If the university (co-)owns patents, it is difficult to walk away and start your own business. Also, I think the share depends on how much effort would be needed to replace you. If you spent years setting something up, but that today it would take only a few hours to read, understand and implement your published articles, then maybe you won't be able to defend 90%. Well, anyway I think it is hard to get an exact value without knowing the exact situation. An attorney might be worth consulting, even if it is expensive, given the impact early choices can have later. – anderstood Jan 9 '18 at 4:45
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    That's not realistic in most places. The university will most likely ask for a share in the 20% range, and whether the prof. will be happy with 10% share depends largely on how large their contribution actually was. – xLeitix Jan 9 '18 at 10:08
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    @xLeitix Cute. In an institute I used to work at the number was closer to 40%. 😕 – Konrad Rudolph Jan 9 '18 at 12:01
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    @xLeitix Why would the university expect a share in business, instead of patent royalties? I would only consider this if the university offers funding, or an equivalent like rent-free lab/office access. – Dmitry Grigoryev Jan 9 '18 at 12:36
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    @DmitryGrigoryev the university takes only patent royalties, and are open to sell the patent to us ( if we secure investor we may buy it). However the problem still lies with giving share to business student. I would like advice on shares division between him and me. If i disagree then we will not submit proposal now and i will most likely look for another business partner this time probably a more stronger who can actually bring full time + fund and can develop business. at the moment i invest time in these activites + he can not take decisions when technology comes into picture. – Phillip Jan 9 '18 at 13:30
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Anything less than giving yourself 100% comes with risks, risks you are probably completely unaware of and with huge complications. What if someone wants to buy the company but only the entire company, but the minority shareholders don't agree to the sale? What if one of the minority shareholders dies, gets divorced, gets sued, etc. and now you have to deal with a shareholder of substantial percentage you may or may not get along with? Are you sure you won't be sued for minority shareholder abuse if you make unpopular decisions?

If you value the success of the endeavor, do not give away shares in it for work that was done for fair wages at the time.

Only give shares out when there is an event that merits another change in ownership such as when someone does offer you funding or at the time of a sale.

Talk to an attorney who is an expert in this specific subject before offering anyone anything.

  • +1 regarding the risks. They should be detailed explicitly in the operating agreement and other addenda like a Buy-Sell Agreement. – Jesuisme Jan 11 '18 at 1:37

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