The story of WYDR and protecting the company in case of a leaving cofounder

Learn how the founders’ entrepreneurial savviness and the slicing pie model helped them to accommodate the different commitment levels throughout WYDR’s bootstrapping stage and to protect the company against dead equity – in the interview with Timo Hahn, Cofounder of WYDR.

WYDR offers original paintings on an open art-trading platform – you can think Tinder for art. They are changing how people interact with art - they give art lovers the possibility to get affordable original artwork and give artists the recognition and financial reward that they deserve and opportunity to reach customers globally. It is also one of the first companies that implemented slicing pie in Switzerland.

 Photo: Andrea Monica Hug

How did the story of the WYDR cofounding team started?

In the beginning it was Matthias and myself as we came up with the idea during our MBA studies. And we knew that we needed additional skills (many J) to build the company. We went together to Startup Weekend where we worked on the initial idea with a team of 5. After the weekend everybody was interested, but we were all in different life situations – one person owned a company already, so it would be more of an advisor role, with a not a lot of availability. Another was a student with many uncertainties about the future and another a freelance developer with free capacity, who build the initial prototype over the Startup Weekend. We decided to continue with Matthias, me andthe developer.

Why did you decide to use slicing pie?

The initial motivation was to accommodate the different dynamics, contributions and commitment of the team and to motivate and promote effort.

During the first bootstrapping[1] years, myself and Matthias had different day jobs to allow us to continue bootstrapping. As a result, in different times we had different availabilities to work on the company.

Our implementation of the slicing pie included the good / bad leaver framework and milestones for cofounders. Some of the requirements felt initially quite counterintuitive – for example tracking the hours that we spent working on the project (we left corporate jobs to have more startup freedom and flexibility), but we understood it was for a good thing. It also helped on the transparency of effort & to have a record for potential investors.

How did the team do?

What became clear quite early on though was that we had different working styles and cultural background. Our tech developer had freelanced his whole life and was used to getting clear assignments whereas we followed the Lean Startup methodologies and built the product along customer needs,which in the early stage couldn’t  provide clear assignments.

After a few months we decided it did not work – we did not get stronger as a team and the expected progress was not there. Together we decided for the CTO to leave – mainly due to different expectations and working styles.

A critical aspect in this change was of course to avoid having dead equity[2]or a compensation dispute.Having the project tracking, milestones and the initial slicing pie agreement helped us a lot.

[1] Bootstrapping is referred to as the process of starting and developing a business using own founder’s resources and no external investment.

[2] Dead equity is an informal term used to describe passive ownership position in early stage companies, typically, as in this case an equity stake of an early stage cofounder who leaves the team whilst keeping his / her equity share.

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What were the main benefits the dynamic equity split gave you?

The dynamic equity split framework gave us built in trust, transparency on the progress and a record for investors. For me personally, I found the transparency very important – as we worked in different location and times. It enabled me to see what others were doing so that I did not feel I am doing all the work alone!And – as in our case when one of the potential cofounders left the team – it gave the company the protection against a dead equity scenario.

When did you decide to freeze the pie?

After a while I noticed with Matthias, that our stakes had stabilized. We did some scenario testing and forecasting and decided we were ready to fix our equity stakes.

Would you recommend it to other cofounders?

Absolutely. It is a bit challenge in the beginning to get your head around it – time tracking, how to measure the contributions not from your own individual but from the company’s perspective, discussions you need to have as a team upfront. I did find it very valuable for usas potential misalignments will surface during those discussions and it is easier to solve these in the beginning than after a year.

Anything else you would add?

The success is in the continuous implementation and the following through.

With thanks for Timo & WYDR for sharing their experience with dynamic equity split based on the slicing pie methodology.