Think of your startup as a gamble (because it is). People place "bets" on the future profits or sale price. Bets are placed in the form of UNCOMPENSATED time, money, ideas, relationships, supplies, equipment and facilities.<p>Your employee is betting 30% of his market salary.<p>You, the original founder, are betting part or all of your market salary plus cash to pay the 70% of the first employee's salary and anything else you have bought.<p>Later you will add more people and they will place bets too.<p>You have no idea how long the betting will last and how much will be bet until the company breakseven or raises a Series A round.<p>At that point you will be able to see how much each person bet.<p>Their equity should be based on their bets.<p>For example. If you and I start a company and we each bet $100,000 (in various forms) before we reach breakeven we each deserve 50% of the equity. However, if you bet $300,000 and I only bet $100,000, you should get 75% and I should get 25%.<p>Anything else isn't fair.<p>This is the essence of the Slicing Pie model (www.slicingpie.com). The Slicing Pie model uses the fair market value of a participant's contribution to not only determine a fair equity split, but also a fair buyout (if any) when someone leaves the company.<p>Traditionally, equity splits have been based on rules of thumb, industry averages, negotiations or guesses about the value of the company and a person's promised contributions.<p>Traditional splits are always wrong.<p>Slicing Pie is used all over the world.