Share it on the way up: why we think about business differently

When Yvon Chouinard wanted Patagonia’s mission to outlive him, he discovered the standard playbook had no move for it, so he wrote a new one.

In September 2022, Chouinard and his family gave the company away. Not sold it, not took it public. They transferred 2% of Patagonia, the voting stock, into a trust built to keep the company true to its purpose, and the other 98% to a nonprofit that now directs the profits toward fighting climate change. “Earth is now our only shareholder,” the announcement read. The company expects to send roughly $100 million a year to the planet instead of to shareholders.

The interesting part isn’t the environmentalism. It’s that the structure to do this didn’t really exist in a clean, off-the-shelf form. Selling would have handed the mission to whoever wrote the biggest check. Going public would have handed it to the quarterly earnings call. Neither protected the thing Chouinard actually cared about. So he and his advisors built something that did.

He decided he had to figure it out

That’s the move worth paying attention to. Most people, faced with “the existing options don’t preserve what matters to me,” conclude that the thing that matters is simply not possible. Chouinard started from the opposite assumption: the mission was non-negotiable, so the structure had to bend. He treated the business model as a variable, not a constant.

Almost nobody does this. And it’s usually not because the old way is right. It’s because the old way is the only way we’ve ever seen.

Why the old way persists

The default equity playbook, incorporate as a C-corp, split the founder shares, set up an option pool, dilute everyone round after round, is not the product of careful comparison. Most founders adopt it because it’s the water they’re swimming in. When we looked at how founders actually split equity, the most common pattern wasn’t a considered choice at all. It was a default, often a 50/50 handshake, arrived at without much negotiation and regretted later.

Status quo isn’t chosen. It’s inherited. And inherited defaults are sticky precisely because questioning them feels like extra work with unclear payoff, right up until they fail you.

You can already start differently

Here’s the hopeful part: you don’t need to be Chouinard, and you don’t need a team of trust lawyers, to opt out of the default. The tools already exist.

You can start as an LLC today, which is far more flexible for tracking real contribution than a share-based C-corp, and convert to a corporation later if and when you raise. We’ve written about why an LLC fits dynamic equity, when to convert to a traditional cap table, and the LLC-to-C-corp path and its tax implications. The point isn’t that everyone should use an LLC forever. It’s that the choice is real, and most people never realize they’re allowed to make it.

But the founding structure is just the start

Choosing the right entity on day one solves the easy part. The harder problem sits further up the mountain, in how equity gets shared as a company grows and succeeds.

We just mapped where startup equity actually ends up, and the picture is stark. Investors overtake founders by the second major round. The employee pool shrinks the whole way. And the people building the product are handed opaque share counts that quietly dilute while the headline number never changes. The abstraction isn’t a bug. It’s how the current model keeps ownership tilted toward the people who already have the most of it.

That’s the norm we actually want to change. Not just the founding split, but the transparency, the abstraction, and the distribution all the way through a company’s life.

Our thesis

Ownership is a claim on everything the work becomes. We’ve argued that the decision about who holds that claim is a moral one, settled while the company is being built, not at the exit. The old model treats that claim as something to concentrate at the top and obscure everywhere else. We think it should be legible, tied to contribution, and shared on the way up, not just at the bottom of the cap table where it rounds to nothing.

Chouinard’s answer was specific to Patagonia’s mission. Ours is specific to a different one: making ownership fair enough that the people who build something can actually see, and hold, their part of it. The mechanism is dynamic equity. The belief underneath it is simpler. The way business has always been done is not the way it has to be done. Someone just has to decide the old options aren’t good enough, and build a better one.

We’re admirers of anyone who does.