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If we are measuring relative risk and equity and converting ideas and money into time, then our unit of measurement will be a
If we are measuring relative risk and equity and converting ideas and money into time, then our unit of measurement will be a
"weighted hour" or wHr
"weighted hour" or wHr
Hours receive more weight when associated with the earlier and riskier years of the company.
Hours receive more weight when associated with the earlier and riskier years of the company.
3 types of investments are measured in weighted hours
3 types of investments are measured in weighted hours
1: Time
1: Time
Any uncompensated time invested by owners can be measured in weighted hours.
(like founders working around the clock pre-money or executive staff earning a few weighted hours a week in addition to a salary)
2: Earned Income
2: Earned Income
Risky early stage investments counted as time invested in the prior year to earn that money by working a job.
(like founders investing hard-earned savings from previous jobs to give the company working capital)
3: Cash
3: Cash
Any other financial investment at lower personal risk counted as present and future time purchased for the company.
(like a privately wealthy founder drawing from family money or more traditional later stage investments)
WHAT ABOUT IDEAS?
WHAT ABOUT IDEAS?
Ideas happen in an instant and are nothing more than a passing thought if you don't spend time turning that idea into a something real.
Ideas happen in an instant and are nothing more than a passing thought if you don't spend time turning that idea into a something real.
Founders with brilliant ideas invest uniquely valuable time in the earliest days of the company, making that time a clearly defined and fair way to compensate them.
Founders with brilliant ideas invest uniquely valuable time in the earliest days of the company, making that time a clearly defined and fair way to compensate them.
Imagine the first year of a company...
Imagine the first year of a company...
1. Time invested is given weight by the year that time was invested
1 hour invested in the first year of the company = 2 hours invested the next year
2. Earned income is given weight by the previous year when the income was earned
1 hour of earned income invested in the first year = 2 hours of time invested that same year
3. Cash investments are given weight by the year that cash will buy time
1 hour of time purchased in the first year of the company = 1 hour invested in the same year
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