What the 'Idea Guy' is Worth at Equity Split

You and your partners in an entrepreneurial venture are about to determine the equity split of your new business -- who gets what percentage. So what's the premium earned by the person who came up with the original idea?

Harvard Business School professor Noam Wasserman conducted a compensation survey looking at IT ventures and reports the following.

Across multiple formulations of the model and its variables, the gap between the equity received by Idea People and the equity received by other founders -- i.e., the "Idea Premium" -- was consistently around 15.0% (e.g., 50.0% of the equity vs. 35.0% of it) in the IT ventures.

Looking at previous data Wasserman found that the idea premium was 10 percent in Life Sciences ventures.

Either way, it pays to be the man with the original plan.

Read more details on Wasserman's Founder Frustrations blog post.

Sean Silverthorne

Sean Silverthorne is the editor of HBS Working Knowledge, which provides a first look at the research and ideas of Harvard Business School faculty. Working Knowledge, which won a Webby award in 2007, currently records 4 million unique visitors a year. He has been with HBS since 2001.

Silverthorne has 28 years experience in print and online journalism. Before arriving at HBS, he was a senior editor at CNET and executive editor of ZDNET News. While at At Ziff-Davis, Silverthorne also worked on the daily technology TV show The Site, and was a senior editor at PC Week Inside, which chronicled the business of the technology industry. He has held several reporting and editing roles on a variety of newspapers, and was Investor Business Daily's first journalist based in Silicon Valley.

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