We made a successful algo trader. How to split the equity?

Question

Two years ago I started a crypto trader based on machine learning (working fulltime since june 2018 on it). By the end of 2019, I had a decent prototype with good live results. In march of 2020, a guy (B) I met on reddit algotrading joined me. He was convinced to come flatshare with me and work on this together fulltime. He dropped out of school for this. At the time, he was doing his own algotrading project, but his project wasn't as promising, and he didn't like school, so he joined my project. In April of 2020, another friend (C) started working part time on the project, doing mostly data engineering for taxes, and working with accountants to handle taxes. He doesn't have as much ML expertise as the rest of the team, but he still is a good coder. In July of 2020, another friend (D) joined the project full time to work on ML algos and data engineering.Everyone put in about 10k of his own money when he joined. Our activity has grown a lot and is now making around 2% of one of the biggest crypo-exchange's volume. We are now incorporating a company. We plan to do a 4 year vesting schedule.What do you think would be a fair equity split should be given the situation I just described?

neximo64 · Accepted Answer

1) Do a calc of hours worked by everyone in the past
2) Split proportionately amongst those hours
3) Apply a wage rate to those hours depending on the job involved
4) Adjust the wage rate so earlier is higher (more risk), later is lower (as the business started working)
Use that as the equity split going forward that you have to still work to vest.
Using a mechanical way to attribute effort everyone can acknowledge is extremely important. The area you'll really have disagreement on is the wage rate to apply & how much premium to apply for an earlier vs late joiner. But those are easier conversations.

Pick-A-Hill2019 · Answer

TLDR; Assuming there is no contract (written or verbal) then the fact that you put in roughly the same amount makes it slightly easier to say - Equal Stakes, Equal Share (20% each).
Longer version -
Ouch. The fact that you are posting it here suggests that there is some disagreement between the 5 of you.
Let me guess - you think you should get more as the founder and source of the idea. Person B says "but without me you would not have continued with development, so I should get the same as you". Person C says, "if it wasn't for me then you then you would not have managed to survive or be as profitable (tax expertise)". Person D says something like "well I tuned the algorithms and increased profits by x% so without me there would be no profits".
Personally I can't imagine investing 10k in to something without something in writing (in fact I'm truly trying to imagine the scenario and I just can’t). What was the agreement when they invested their money? Not trying to be snarky but I just can't see a situation where the conversation went "We need more money", Person B (or C or D) just went "cool, here's 10k, enjoy".