How do you distribute equity among co-founders?
How do you distribute equity among co-founders?
Summary
- Rule 1) Try to split as equaly and fairly as possible.
- Rule 2) Don’t take on more than 2 co-founders.
- Rule 3) Your co-founders should complement your competencies, not copy them.
- Rule 4) Use vesting.
- Rule 5) Keep 10\% of the company for the most important employees.
How do you divide founder equity?
Each element’s weight is then multiplied by the ranked level of the founder and added up to indicate the founder’s equity split. For example, founder 1 has a ranking of 10 for Ideas, meaning that he contributed the most to this. We multiply 10 by the weight of 7 to get 70 points.
How do you prevent founders from dilution?
The broad-based weighted average anti-dilution provision is the best one for the founders. A broad-based weighted average for shareholders of a company’s preferred stock gives investors anti-dilution protection when a company issues new shares.
Should you split the equity between co-founders?
Getting a larger piece of the equity pie is worth nothing if the lack of motivation on your founding team leads to failure. If you don’t value your co-founders, neither will anyone else. Investors look at founder equity split as a cue on how the CEO values his/her co-founders.
Should equequity be split equally?
Equity should be split equally because all the work is ahead of you. My advice for splitting equity is probably controversial, but it’s what we have done for all of my startups, and what we almost always recommend at YC: equal equity splits among co-founders. [1] These are the people you are going to war with.
Is it better to split equity 50/50 or equally?
For that reason, it’s much better to split equity equally. It doesn’t have to be 50/50, it might be 42 and 58 but it has to be more or less similar. After you’ve decided how to split equity in your startup, it’s very important to plan ahead for any future changes in commitment.
What are the most common mistakes entrepreneurs make with equity crowdfunding?
One of the most common mistakes I see is a lack of reverse vesting (or a similar mechanism) This is where the equity is split and given to each founder without a clawback mechanism.