Slicing is a simple formula based on the principle that a person's % share of the equity should always be equal to that person's share of the at-risk contributions.
At-risk contributions include time, money, ideas, relationships, supplies, equipment, facilities or anything else someone provides without full payment of it's fair market value.
Every day people contribute more and more to a company in hopes that it will someday generate a profit, go public or sell. Because contributions are constantly being made, the model is dynamic. It self-adjusts to stay fair.
Slicing Pie normalizes cash and non-cash contributions by converting to a fictional unit called a "Slice". A slice represents a normalized at-risk contributions. A slice is kind of like a poker chip.
There are two basic types of contributions.
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Cash contributions consume cash, non-cash contributions do not. Cash is treated with a 4x multiple on face value.
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Unpaid time, for instance, is a non-cash contribution whereas an unreimbursed expense is a cash contribution. Time is treated with a 2x multiple on market rate for that contribution.
An individuals % share = individual's Slices ÷ all Slices
At any given time, the above formula will provide a perfect equity split. The formula applies until the company breaks even or raises enough capital to pay participants for their contributions.
At this point the split "freezes" and subsequently determines the distribution of dividends (or more likely, conversion to Units in the LLC) or the proceeds of a sale.
Solutionz has been using Slicing Pie since the formation of Solutionz Innovations in 2017. When that entity was closed during the pandemic, the "members of the Pie" became Foundation stakeholders, with their slices moved proportionally to the new Solutionz Group pie.
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