“How do we split up the equity ownership of our startup?”
This guide provides a framework and process to help startup founders answer this common question.
Equity ownership affects the culture and sense of wellbeing of a startup. Founders typically sacrifice a great deal of other life opportunities to work on a startup effort. In exchange for that sacrifice, a founder wants to feel the ownership equation with any co-founders is fair.
In detail, this Founder’s Pocket Guide walks entrepreneurs though the following elements:
• Take The Founder Test to make sure everybody deserves founder status
• Review the case for splitting your founder equity into equal parts
• Use the Equity Split Scorecard as a fair method to allocate more equity to highly skilled cofounders
• Solve common equity problems using founder vesting structures
• Answer common equity split questions like IP and founder-investors
Note that this guide does not go into how to use equity to attract employees or using equity to pay service providers, advisors, development companies, or other contractors. This guide focuses solely on the best practices of deciding the equity ownership split between the founders of a startup venture.