Hackathon Ownership Split

This is a realistic simulation based on common startup ownership disputes, demonstrating how Mediator.ai works in practice.

Background

After winning a high-profile hackathon with an innovative optimization algorithm, co-founders Maya Chen and Carlos Rodriguez faced a tough decision: how to split ownership fairly. Each founder had different ideas about what would reflect their contributions and the risks they’d taken. Mediator.ai helped them work through the differences between their technical and business perspectives.

The Parties

Maya Chen - Serving as CTO and the technical visionary behind the breakthrough optimization algorithm, Maya had left a lucrative position at Meta to pursue startup uncertainty. Her technical expertise and intellectual property contributions formed the foundation of the company’s competitive advantage.

Carlos Rodriguez - The CEO with strong market and operational expertise and a notable track record in startup growth, Carlos contributed through strategic vision and business development experience. His network and operational skills were crucial for scaling the technology into a viable business.

Despite their shared commitment to the startup’s success, their respective positions on ownership allocation underscored their differing priorities and risk tolerances.

Initial Positions

Each party worked with Mediator.ai’s assistant to develop their position statement, outlining their requirements and constraints in detail.

Maya Chen’s Position

Maya emphasized the criticality of her technical contributions and the personal risk she undertook by leaving a secure role. Her core priorities included securing a higher ownership percentage that would reflect both her technical input and the sacrifice involved:

“Achieving a 60-65% ownership stake is pivotal not just for my personal valuation but also for aligning incentives towards a strong technological roadmap.”

She was also clear about her bottom line, noting that the ownership distribution must accurately reflect the personal and intellectual property risk she assumed:

“Any ownership split should accurately represent both the intellectual property and the personal sacrifice made.”

Her BATNA (Best Alternative to a Negotiated Agreement) involved continuing development independently:

“My BATNA is to continue developing the algorithm and potentially license the core technology independently or partner with another technical co-founder.”

Carlos Rodriguez’s Position

Carlos advocated for a balanced partnership based on a 50/50 ownership split. He stressed that such equality was essential for ensuring effective decision-making and maintaining joint motivation for the company’s strategic direction:

“I view equal partnership not just as fair, but as essential for good decision-making, shared risks, and aligned rewards.”

He also articulated the need for operational collaboration, warning that a disproportionate allocation might undercut mutual trust:

“A significantly unequal split might hurt our ability to make decisions together and could create misaligned incentives.”

Carlos’s BATNA involved reconsidering his level of involvement:

“My BATNA would be to reconsider my level of personal investment in the startup, potentially pivoting to a less hands-on role.”

The Mediation Process

Mediator.ai began its process by analyzing both positions across multiple iterations, employing a Nash bargaining algorithm to identify mutually beneficial concessions. Over the course of five iterations, the AI system generated a series of 12 potential agreements that strategically balanced each founder’s key concerns.

Key Insights Identified

• Performance Alignment: Both parties valued clear performance metrics, which became a foundation for structuring a performance-based ownership pool
• Risk Recognition: The need to acknowledge different types of risk (technical vs. market) while ensuring fair compensation
• Future Flexibility: Importance of building in mechanisms for ownership adjustments based on future contributions and milestones

The Final Agreement

After careful analysis and multiple rounds of refinement, the AI mediator proposed a solution that addressed both founders’ core concerns:

Base Ownership Split

• Initial Base: 50% to each founder for equal partnership in decision-making
• Performance-Based Premium: Up to 15% additional ownership reserved for Maya upon achieving technical milestones
• Final Range: Maya’s total ownership of 60-65% when milestones are met

Key Terms

1. Vesting Schedule: Three-year vesting period with performance conditions
2. Technical Milestones: Measurable targets for product performance and scalability
3. Equal Decision-Making: Maintained on all strategic issues
4. Annual Reassessment: Regular review of ownership allocation and milestones

Why This Solution Worked

Equal Partnership Foundation

The 50/50 base split addressed Carlos’s need for equal decision-making power while maintaining collaborative leadership structure.

Performance-Based Recognition

The additional 15% ownership pool tied to technical milestones acknowledged Maya’s unique contributions and risk-taking without compromising the partnership foundation.

Future Flexibility

The performance-based structure allowed Maya to earn her desired 60-65% range through measurable achievements rather than upfront allocation.

Preserved Decision-Making

Maintaining equal decision-making rights ensured both founders remained fully engaged in strategic planning regardless of ownership percentages.

Lessons Learned

This case demonstrates several key principles of successful ownership negotiations:

1. Multiple Forms of Value: Technical contributions, business expertise, and risk-taking all deserve recognition
2. Future-Oriented Thinking: Ownership structures should account for ongoing contributions, not just initial input
3. Alignment Over Equality: Sometimes unequal splits create better alignment than forced equality
4. Performance Transparency: Clear metrics reduce ambiguity and future conflicts