The Contribution Decay Framework
Ownership should track continuous contribution. Not history.
Traditional equity models assume IP has enduring, defensible value. In the AI era, that assumption is breaking. Code can be replicated in weeks. The moat has shifted from “we built this” to “we’re still building this.” This framework makes equity track reality.
The Problem
Traditional equity assumes IP lasts forever. It doesn’t.
Traditional models split equity once and freeze it. This worked when building was slow and IP was defensible. In the AI era, neither is true.
AI commoditizes execution
What took 6 months to build can be replicated in weeks. Code, content, and design are increasingly generatable. The act of building is no longer the moat.
The half-life of IP is shrinking
Frameworks and architectures that were state-of-the-art 18 months ago are now table stakes — or obsolete. Technical IP depreciates faster than ever.
Defensibility has shifted
The moat is no longer "we built this" — it's ongoing relationships, domain expertise, taste, judgment, and adaptation speed. These require continuous investment.
Legacy contributors overvalue past work
This is human nature, not malice. But a 50% stake earned by building v1 shouldn't entitle you to 50% of value created by someone else for the next 5 years.
Principles
Five rules that make equity honest.
Contribution has a half-life
Every contribution type loses relevance over time. Code gets rewritten. Strategies get overtaken. Even relationships cool without maintenance. The framework models this decay explicitly.
Equity follows energy, not history
The person creating value today should hold more influence than someone who contributed two years ago and hasn't contributed since. History is acknowledged — but it doesn't grant permanent entitlement.
Different contributions decay at different rates
Capital invested decays slowly (5-10%/year). Technical IP decays fast (25-40%/year). Relationships sit in between. Not all contributions are equal in durability.
There is a founder floor
Anyone who took genuine inception risk — present before there was evidence of value — deserves a minimum equity position that never fully decays. Small (3-8%), but permanent.
The framework must be objective and universal
Applicable to co-founded companies, strategic alliances, joint ventures, advisor relationships, and service partnerships. If it only works for one deal, it's a negotiation — not a framework.
Decay Schedule
Not all contributions decay equally.
Capital is durable. Code is not. The framework assigns decay rates based on how quickly a contribution type loses relevance.
Cash risk is real and doesn't expire
Trust-based, but atrophies without active contact
Valuable when current; stale strategy is worse than none
Knowledge transfer has diminishing returns once absorbed
AI commoditizes; frameworks shift; code rots
Once someone is enabled, the enabler's contribution is absorbed
Shapes direction but is absorbed into the product
The Key Test
The AI Replication Test
When valuing any IP or technical contribution, ask one question:
“If a competent person with AI tools started from scratch today, how long would it take to reach 80% of this contribution’s value?”
< 2 weeks
Minimal defensible value
Could be rebuilt with off-the-shelf tools and AI in days.
2-8 weeks
Some defensible value
Architecture decisions or domain-specific tuning add value beyond the code.
2-6 months
Significant defensible value
Deep domain integration, proprietary data, or complex system-of-systems.
6+ months
Genuine defensible value
Proprietary data, regulatory compliance, or deep institutional knowledge.
This test should be applied at contribution time and during quarterly reviews, because the answer changes as AI capabilities improve. What took 6 months to replicate last year might take 2 weeks today.
Anti-Patterns
Arguments this framework answers.
Every equity negotiation encounters these claims. The framework provides an objective response to each.
"I built v1, I deserve 50% forever"
Decay means v1 contributions lose value unless the builder keeps contributing. Building the foundation matters — but so does building everything after it.
"My IP is worth $X"
Fair market value test: what would you pay a stranger for this? AI replication test: how fast could it be rebuilt? If someone could replicate 80% in 2 weeks, the IP isn't worth what you think.
"We agreed on 50/50 at the start"
A dynamic model means the split reflects reality, not a handshake from 18 months ago. If contributions have diverged, the split should too.
"I'm still advising"
Light-touch advising (fortnightly calls) accrues at a fraction of active building. A 1-hour call every two weeks is not equivalent to 40 hours a week of building.
"My framework is unique"
If someone could rebuild 80% of it with AI tools in 2-4 weeks, the defensible value is in the 20% that can't be replicated — and that's usually domain knowledge, not code.
"But I introduced the key client"
Relationship contributions are valued and multiplied — but they decay too, unless you're actively maintaining and growing those relationships.
The Threshold Test
Before opening the equity ledger at all, ask one question:
“Did this person contribute directly to the entity in question, or did they contribute to the person who then built the entity?”
If someone taught you to code, they don’t get equity in every app you build. If someone’s tool accelerated your work, that’s a vendor relationship — not a partnership. Mentorship, enablement, and tooling are valuable, but they’re compensated through fees, gratitude, and referrals — not equity in independent ventures.
The Process
Quarterly review. Four steps. No ambiguity.
Equity is a living number, recalculated quarterly. Both partners participate honestly.
Log contributions
Both parties submit their contributions for the quarter — time, capital, IP, relationships, anything of value.
Apply decay
All historical contributions are decayed according to their type. A contribution from 6 months ago is worth less than when it was made.
Recalculate positions
The equity split is recalculated. Each partner sees their current position based on the living ledger.
Discuss and align
Do the numbers reflect reality? If something feels off, surface it now — not six months later.
Dispute Resolution
Within 20%
Both parties state their valuation independently. If within 20%, average them.
Beyond 20%
Bring in a neutral third party to assess. Their assessment is binding for that contribution.
Annual review
Review decay rates, multipliers, and founder floors once a year. Adjust by mutual agreement.
Transition Events
When things change.
Freeze trigger
At a defined event (funding round, revenue threshold, acquisition offer), equity percentages freeze. Post-freeze, standard vesting applies. The freeze converts dynamic equity into traditional equity.
Buyout mechanism
Either partner can offer to buy the other's position at the current equity percentage times an agreed valuation (revenue multiple, third-party assessment, or pre-agreed formula).
Conversion to fee-for-service
When a contributor transitions from equity-earning to paid services, their current equity position is frozen. Future contributions are compensated at market rate. The frozen equity continues to decay unless a buyout or lock is agreed.
Interactive Tool
Equity Decay Calculator
Add contributions for each partner, set founder floors, and see how the equity split evolves over time as contributions decay at different rates.
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Equity should be earned continuously.
This framework is open. Use it for your partnerships, alliances, and ventures. If you’re building in the AI era and want to structure ownership fairly, we’d love to talk.
Let’s Talk