Slicing Pie - Funding Your Business Without Funds

1. What is "Slicing Pie" by Mike Moyer about?

• Dynamic equity split: "Slicing Pie" introduces a dynamic, fair method for dividing equity in early-stage startups based on actual contributions rather than fixed percentages.
• The Grunt Fund concept: The book centers on the "Grunt Fund," a system that tracks and rewards the relative value of each participant’s input as the company evolves.
• Focus on fairness: Moyer emphasizes that treating contributors fairly is essential for team morale, long-term success, and avoiding resentment.
• Practical guidance: The book provides step-by-step instructions, real-world examples, and calculations for implementing the Slicing Pie model in any startup.

2. Why should I read "Slicing Pie" by Mike Moyer?

• Avoid common equity mistakes: The book addresses the pitfalls of traditional fixed equity splits, which often lead to disputes and failed startups.
• Fairness and motivation: It offers a proven framework to keep all contributors motivated and feeling valued, reducing the risk of "disgruntled millionaires."
• Actionable and accessible: Moyer’s writing is direct, practical, and filled with actionable advice, making it easy to apply the concepts immediately.
• Real-world relevance: The book is based on the author’s extensive entrepreneurial experience and is validated by research and case studies.

3. What is the main problem with traditional equity splits in startups, according to "Slicing Pie"?

• Fixed splits are inflexible: Traditional equity splits (e.g., 50/50 or 70/30) are set too early, before the true value of each person’s contribution is known.
• Startups change rapidly: The needs and contributions of team members evolve, making early agreements quickly outdated and unfair.
• Leads to resentment: Fixed splits often result in one or more team members feeling undervalued, which can destroy relationships and the business.
• Difficult renegotiations: Adjusting fixed splits later is awkward, stressful, and can be a company-killer.

4. What is the "Grunt Fund" method described in "Slicing Pie" by Mike Moyer?

• Dynamic equity allocation: The Grunt Fund is a system that allocates equity based on the relative, theoretical value of each participant’s contributions as they occur.
• Tracks all inputs: It accounts for time, money, ideas, relationships, intellectual property, and other resources, assigning each a fair value.
• Rolling calculation: Ownership percentages are recalculated regularly, reflecting the current state of contributions and keeping things fair.
• Pie as a promise: "Pie" represents a promise to issue equity in the future, not actual shares, until a formal investment or company milestone is reached.

5. How does "Slicing Pie" define and value different types of contributions to a startup?

• Time: Valued at the Grunt Hourly Resource Rate (GHRR), which is the market salary the person would earn elsewhere, doubled to account for risk.
• Money: Cash contributions are valued at four times their amount, reflecting the higher risk and importance of cash in early-stage startups.
• Equipment and supplies: Only business-enabling assets are valued, typically at purchase or resale value, while incidental supplies are usually ignored.
• Ideas, IP, and relationships: Only "baked" (well-developed, original, non-obvious) ideas and productive relationships are valued, often based on time invested or negotiated royalties/commissions.

6. What are the key steps to implementing the Grunt Fund model from "Slicing Pie"?

• Appoint a leader: Designate someone to manage the Grunt Fund and make final decisions.
• Agree on valuation: Set fair, consistent values for each type of contribution before they are made, using the book’s guidelines.
• Track contributions: Meticulously record all inputs (time, money, resources) from each participant.
• Calculate and update: Regularly recalculate each person’s share of the "pie" using the formula: individual contribution ÷ total contributions = percent of the pie.

7. How does "Slicing Pie" handle team members who leave the startup (resign, are fired, or become disabled)?

• Resignation without cause: The departing member forfeits most of their pie, retaining only the actual value of cash or assets contributed, and the company may buy back their share.
• Resignation with good cause or termination without cause: The member keeps their full theoretical share, minus any severance, and is free to compete.
• Termination with cause: The member is treated similarly to resignation without cause, losing multipliers and subject to buyback.
• Death or disability: The member (or their family) retains the full benefit of their contribution, treated with respect and fairness.

8. What is the "Magic Number" in "Slicing Pie," and when should a startup stop using the Grunt Fund?

• Magic Number defined: The Magic Number is the negotiated pre-money valuation at which the company transitions from the Grunt Fund to formal equity allocation, often triggered by a significant investment (typically $1 million).
• Diminishing returns: When the theoretical base value (TBV) is so high that new contributions barely affect equity, it’s time to formalize.
• Predictable business model: If the company achieves stable revenue and growth, the Grunt Fund can be replaced with standard equity or option plans.
• Legal and financial formalities: Major investments or company milestones require formal legal agreements and equity issuance.

9. How can an existing company retrofit the Grunt Fund model from "Slicing Pie" if it started with a fixed split?

• Get team buy-in: Convince all stakeholders, especially "fat grunts" (those with more than their fair share), of the benefits of fairness and dynamic equity.
• Reconstruct contributions: Estimate past inputs (time, money, resources) as accurately as possible, using full-time, part-time, or half-time estimates if needed.
• Recalculate equity: Use the Grunt Fund formula to determine what each person’s share would have been from day one.
• Adjust and move forward: Issue new equity or adjust ownership to reflect the fair split, and continue tracking contributions dynamically.

10. What legal and tax considerations does "Slicing Pie" by Mike Moyer recommend for startups using the Grunt Fund?

• Form a legal entity: Set up an LLC or corporation to protect personal assets and clarify ownership of contributions.
• LLCs preferred: LLCs offer more flexibility for profit sharing and dynamic equity adjustments, aligning well with the Grunt Fund.
• Vesting and buyback: In corporations, use restricted stock with Grunt Fund-style vesting and buyback provisions, and file 83(b) elections to avoid tax issues.
• Consult a Grunt Fund-friendly lawyer: Not all attorneys understand dynamic equity splits, so find one familiar with the model to draft appropriate agreements.

11. What are the key takeaways and best practices from "Slicing Pie" by Mike Moyer?

• Fairness is essential: Treating all contributors fairly is the foundation of a successful, motivated startup team.
• Dynamic, not static: Equity should be allocated dynamically, reflecting real contributions as the company evolves.
• Track everything: Meticulous tracking of time, money, and resources is crucial for transparency and fairness.
• Adapt as you grow: The Grunt Fund is best for early-stage startups; transition to formal equity structures as the company matures or raises significant capital.

12. What are the best quotes from "Slicing Pie" by Mike Moyer, and what do they mean?

• "Fairness is More Fun." – Emphasizes that startups thrive when everyone feels valued and treated justly, making the journey enjoyable.
• "When people slice pie they usually do it wrong. They make one of two mistakes. They either slice the pie before they bake it or they slice the pie after they bake it." – Highlights the core problem with traditional equity splits and the need for a dynamic approach.
• "Pie isn’t equity, it’s a promise. Promises should be kept." – Reminds founders that early-stage equity is about trust and moral obligation, not just legal contracts.
• "If you bake it, they will come…" – Suggests that building a fair, transparent system will attract the right people and resources to your startup.
• "Grunt Funds aren’t for mean people." – Underlines that the model only works if everyone is committed to fairness and good faith.