Dividing Equity Among Co-founders 📊 How much equity should each co-founder get? Most founding teams think they should divide it up equally but even equity splits are rarer than you think. The idea of a perfectly equal split might sound great, but in reality, it often falls short of addressing each founder's contributions. Let's break it down: 🤝 𝗧𝘄𝗼-𝗙𝗼𝘂𝗻𝗱𝗲𝗿 𝗧𝗲𝗮𝗺: Aiming for equal shares might seem like a logical starting point, but it's important to recognize that true equality is rarely achieved. The median split is 55% for Founder A and 45% for Founder B. 🤝 𝗧𝗵𝗿𝗲𝗲-𝗙𝗼𝘂𝗻𝗱𝗲𝗿 𝗧𝗲𝗮𝗺: In a trio of founders, the median split is Founder A with 47%, Founder B with 33%, and Founder C with 17%. 🤝 𝗙𝗼𝘂𝗿-𝗙𝗼𝘂𝗻𝗱𝗲𝗿 𝗧𝗲𝗮𝗺: Expanding the team to four members adds complexity to the equation. Here's the median distribution: Founder A at 40%, Founder B at 27%, Founder C at 18%, and Founder D at 10%. One thing I often see with first-time founders is them saying, "We make decisions together." In theory, that's great, but someone needs to make the final call as not all decisions will reach consensus. A key lesson I've learned is that a balanced equity split isn't about an even 50-50, but about honoring each founder's commitment and value. I divided equity equally in a previous venture, only to realize it didn't reflect differing contributions. This time, my co-founder and I discussed our inputs, agreed on a distribution that reflected our roles, and set a foundation for a successful partnership. Peter Walker is a must-follow for all startup data like this. Thanks for the infographic and ongoing data you share on the platform. #startups #venturecapital #entrepreneurship ____ Enjoy this? Follow Kevin Jurovich for daily startup & VC insights and the occasional meme. ✌️
Appreciate the share Kev - more Carta data like the above from us every week! Also gotta mention the vesting schedules. Minimum 4 years for founders, maybe 5 or 6 if you're a long-term planner. Absolute must haves. https://carta.com/subscribe/data-newsletter-sign-up/
I offered my last cofounder 50% worth of chuckie cheese tokens
What if you have a dozen founders
... and what if its like Emoha where we all own the firm? Like where every team member behaves exactly like the founder?
Excellent post, Kevin. It's crucial for founders to understand that equity division should be proportional to each person's role and effort, not an equal distribution.
i was a fan of this model, but when i got to YC they suggested all equal for 3 founders and less. If someone doesn't work you'll know in less than a year, before their cliff.
This model is based on each founder's contributions, which is useful but uncertain until they've worked together. I prefer the YC model, where all founders initially get similar equity shares. If someone isn't pulling their weight, it's apparent sooner rather than later.
Great advice!
Very useful content as always. 20 years in the industry and still/always learning from your posts. I love it!
Fidotek AI Founder | Dog-Machine Interface | Patents | Veteran Combat Medic
2dWhile this "cheat sheet" is a great reference, I think it's based on the assumption that all of the co-founders arrive at the starting gate on the same day. There are many nuanced (and perhaps not so nuanced) variables that must be taken into account. For instance, an initial founder building the concept for 6 months prior to "startup" and needing a second founder may see a 75%/25% split. If the business core value is a marketing model (e.g., a new Whiskey brand in a competitive industry), the marketing co-founder will likely require significantly more equity than the distiller. A Tech Founder pioneering a disruptive patented technology may see a much higher equity "split" than a CMO. Further, a product or technology that requires 2 years of development will not need a marketing genius at the start, but a proven rainmaker WILL be required at some time. Co-founder or early employee? Equity value contribution? I throw these hypotheticals out simply to illustrate that while the cheat sheet may be a starting point, the devil is in determining the VALUE contribution to the FUTURE, and when that expertise is required. And EGO management becomes a huge part of the CEO's challenge integral to implementing any equity split.