Dynamic Equity Splits in Malaysian Startups: Applying the Slicing Pie Model

The purpose of this article is to highlight the features of dynamic equity splits. We focus on the framework developed by Mike Moyer in the Slicing Pie Handbook.

Splitting shares in early-stage bootstrapped companies is a persisting headache. How do you divide sweat equity? Founders debate who “deserves” what—and when contributions shift over time, initial allocations can feel outdated or unfair.

Malaysian startups are vibrant. However, founders often default to arbitrary share splits, only to regret it when a co-founder invests far less time than anticipated.

Clear, flexible agreements based on contribution can reduce friction and legal costs down the road and increase the likelihood of long-term success.  

traditional corporate structures

In typical corporate structures, members have a fixed number of shares issued to them either at incorporation or at a later date. Allocations can be:

• 100% to a sole shareholder,

• 50% - 50% for an equal split between shareholders

• 60% - 40% split or other allocations as long as the total number of members for a private company does not go over 50.

Companies can always issue new shares which change the company structure and dilute the shareholder percentages. Although issued shares cannot be “taken away”, their relative value may change if the company, among others:

• issues new shares to existing shareholders;

• undertakes a share buy-back;

• undertakes a new funding round which adjusts the paid-up capital; or

• requires shareholders to sign up for a reverse vesting agreement after funding.

dynamic equity split approach

The dynamic equity split using the Slicing Pie model by Mike Moyer introduces variability for equity participation to the core of the business structure.

The dynamic equity split ties future ownership directly to actual contributions—cash, sweat equity (non-monetary contributions such as physical labour, intellectual effort or time), networks, etc—valued in a common currency called “slices.” 

As each participant commits sweat equity they accrue slices. The slices reflect the agreed market salary. Software engineers, accountants, lawyers or general admin members generate a different number of slices depending on their contributions.

When members stop contributing or depart, their slices convert to shares if the business becomes profitable, enters into a new funding round or liquidates. This encourages members to stay unless they have a good reason to leave.  

when can I adopt a dynamic equity split?

The dynamic equity split can be adopted before or after incorporation. If the company is not yet incorporated, you can choose to incorporate:

• with a sole shareholder; or

• with more than one shareholder in various percentages.

Upon conversion if the company is owned by:

• a sole shareholder, that shareholder is legally required to issue new shares in accrued proportions to the other members.

• more than one shareholder, buy-back options must be implemented to make sure that the final shares are proportionate to the slices accumulated.

How does a dynamic equity split work in practice?

A dynamic equity split agreement includes many of the clauses that traditional shareholder agreements and subscription agreements do. Other than that:

• You assign a “slice” value to each contribution. Then, you use pre-determined multipliers to value time, cash, or other contributions. For example, cash is more valuable than time so cash provides twice more contributions than time.  

• You track the slices on a weekly or monthly basis in a ledger. This can be a website or spreadsheet. At any point, you can see each participant’s relative contribution to the company’s performance.

• Convert the slices into shares once you reach a milestone such as breakeven, extended profitability over 6 months, acquisition or IPO, etc.  

• Departing members can cash out their shares at fair value or forfeit unvested shares using a pre-determined formula. If someone leaves early, slices may be subject to a “grace period” or haircut to discourage freeloading.

What kind of commitment can be quantified into a dynamic equity split?

• General time commitment of a member;

• Financial commitment for equipment, supplies, or unreimbursed expenses;

• Commission for revenue earned by salespeople;

• Royalty rates for any IP that generates income;

• Fees of service providers or consultants who help the company;

• Finder’s fees for service providers who introduce you to major partners.  

Why a founder should consider a dynamic split

Below are some of the relevant considerations when deciding whether to adopt this model.

• Fairness and transparency - Parties see exactly how their inputs translate into ownership, reducing suspicion and resentment. Tracking justifies the contributions.

  
  

• Flexibility for Pivot-Heavy Ventures - As roles morph—marketing shifts to product or tech founders step back—slices adjust automatically. New founders can be brought in with clear justifications for why shares or slices are allocated in any particular way.

  
  

• Enhanced Team Motivation - Knowing extra hours or a strategic connection earn tangible ownership stakes drives accountability for highly motivated members.

  
  

• Investor Confidence - Despite a potential lack of familiarity or worries about complexity, investors value fair alignments of incentives which are detailed and negotiated upfront.

Cons and Considerations

A dynamic equity split may not work for everyone. Like any agreement, it has certain legal risks attached to it. But founders must decide whilst balancing all positives and negatives:

• Administrative Burden - Meticulous tracking of hours, expenses, and non-cash resources can feel onerous without disciplined processes.

• Legal Drafting Complexity - Malaysian shareholder agreements must detail the conversion mechanism clearly to satisfy investors, regulators and auditors. There are no official templates and these contracts have not been tested in Malaysian courts.

• Tax and Regulatory Ambiguity - While no major tax events trigger before conversion, Inland Revenue Board examiners may question non-cash contributions and valuation.

• Cultural Resistance - In Malaysia’s relationship-driven business networks, founders may prefer the certainty of fixed percentages, especially when family or friends invest.

• Investor Education Necessary - Early-stage VCs and angels in Malaysia might need a primer on dynamic splits before agreeing to deploy capital.

  
  

Making It Work in Malaysia

1. Start with a Pilot Team: Test the model on a small founding group before extending it to employees or advisors.

2. Choose Clear Valuation Multipliers: Anchor time and resource valuations to market benchmarks (e.g., market salary, hourly freelance rates, fees, etc.).

3. Leverage Digital Tools: Platforms like PieSlicer or custom Google Sheets or Excel with built-in formulas can automate slice tallying.

4. Build Legal Muscle: Work with Malaysian corporate lawyers versed in the Companies Act 2016 requirements to draft agreements to reduce legal risks.

5. Educate Stakeholders: Host a workshop or provide a one-pager explaining how dynamic slices ensure long-term fairness to potential associates.

Conclusion

Deciding on any particular split early on without detailed consideration of long-term contributions can signify a lack of clarity of purpose and negotiation skills. It seems easier to pluck a number out of the air to reach an early agreement and avoid friction. However, this can be a no-win situation which many founders learn to regret.

By embracing the dynamic equity model, Malaysian startups can sidestep the nervousness around equity splits that plague many new ventures. Though it demands discipline in tracking and clear legal drafting, the payoff is a team that feels genuinely valued—and a cap table that accurately reflects who’s building value, day by day.