Smartix Swinging for the Fences Case Solution

To construct a prototype of the system, Vivek hired an engineer with whom he had previously worked. Throughout the development of Smartix, the engineer stayed with Vivek despite of having his job and kept adding and editing features as per requirement. Saurabh was already working on two other start-up projects, therefore, he could help Vivek in areas where he had little or no knowledge. With Saurabh's assistance, Vivek developed the revenue and pricing model for Smartix as well as plans for how to raise and use capital. Krill was recruited in the team mainly due to his background in analytical consulting and worked in Smartix on a part-time basis. Therefore, Vivek did construct a good founding team, taking care if all aspects of the project at hand.

2. What are the pros and cons of Vivek's approach to splitting the equity within the founding team?

Vivek’s reason behind his approach was that every member should be given what he deserves based on the efforts put in by them. The advantage of Vivek’s approach was that it ensured fairness. He came up with a framework which had four categories: past contributions, future contributions, commitment and opportunity cost, using which the share of equity was agreed upon. Secondly apart from the engineer the rest of the founding members were involved in this process, where Vivek made sure to protect the rights of the engineer. This enabled impartial judgment and equal share in accessing everyone’s performance. Placing more importance on future contributions as compared to past contributions it also motivated the team to work efficiently.

However, using this approach there was no guarantee that the performance of any individual would remain the same in future. If someone was to lack behind or if someone’s performance improved there were chances that the members might want to reevaluate their share. Similarly, if a new member was to join their team, the same framework could not be used to assign him a share in the equity.