The initial division of ownership among founders. A good split reflects roles, risk, commitment level, and expected contribution, not just friendship or convenience.
Why it matters
The founder equity split is one of the most consequential decisions a startup makes. Get it wrong and you're building resentment, investor red flags, and potential lawsuits into the foundation of your company. Investors pay close attention to how founders split equity because it reveals how the team thinks about fairness and long-term planning.
How it works
There are three main approaches: equal splits (simple but often unfair), negotiated fixed splits (based on expected contributions), and dynamic/contribution-based splits (adjusts over time based on actual input). Factors to consider include time commitment, cash investment, intellectual property, opportunity cost, domain expertise, and risk tolerance. Whatever method you choose, add vesting to protect against early departures. For example, two founders might agree on a 60/40 split based on one going full-time while the other stays part-time, with four-year vesting and a one-year cliff for both.
Learn more
- How to Split Equity in a Startup
- How to Split Equity in a Two-Person Startup
- Dynamic vs. Fixed Equity
- Famous Co-Founder Disputes
Related terms
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