The formula to calculate the Dynamic Equity Split (DES) is:
\[ DES = \frac{IC}{TC} \times TE \]
Where:
A dynamic equity split is a method used to allocate ownership or equity in a company based on the contributions of each individual involved. Unlike static equity splits, which are fixed and determined at the outset, dynamic equity splits adjust over time to reflect the actual contributions made by each party. This approach ensures a fair and equitable distribution of ownership, rewarding individuals proportionally to their input. Dynamic equity splits are particularly useful in startups and collaborative projects where contributions can vary significantly over time.
Let's say the individual's contribution (IC) is $50,000, the total contributions (TC) are $200,000, and the total equity (TE) is $1,000,000. Using the formula:
\[ DES = \frac{50000}{200000} \times 1000000 = 250000 \]
So, the dynamic equity split (DES) is $250,000.