Week 4: Startup Equity

What approaches can founders take when splitting equity?

Some split it upfront while others wait to get to know each other before finalizing the split. Some use a scorecard to consider different factors and contributions between them while some distribute equity evenly among all founders. 

But, early in the startup's life, there is a great deal of uncertainty. Does the team have the right strategy, the right business model, will the role of any founder change, and will the founders all be fully committed to the startup in the long run? Should a founder who leaves early in the life of the startup end up with the same ownership as others who stick around? 

How you consummate this "first deal" between founders can send positive or negative signals to future investors so it's important to carefully consider the pitfalls. 

Below are a few videos that walk you through these concepts and more. 

How to Distribute Startup Equity (The Smart Way) – (Dan Martell)

A simple model for sharing equity among founders, team members, advisors, and investors.

How to Divide Equity Between Co-Founders in a Startup (Cate Costa)

  • Financial contributions
  • Sweat equity
  • Time commitment
  • Experience level
  • Roles of founders
  • Ideas and intellectual property 

Founder’s Dilemmas: Equity Splits (Kauffman Founders School)

  • What can go wrong when you split 50-50?
  • What are the pitfalls?
  • How should you think about splitting equity?