| My thoughts on equity boil down to these two rules: 1) Always split evenly amongst cofounders 2) Always have a vesting schedule with no cliff. Reasoning: For number 1, there is no need to start off with a battle about "who is more important" or "who contributed more". These things don't and won't matter down the line. There are basically three ways a startup ends: 1) Total failure, in which case the equity split doesn't mean anything. 2) Great success, in which case the equity split doesn't really mean much, because does it matter that you got 10 million and your cofounder for 12 million? Or 3) A meh exit. This is the only place where the equity split might matter, because maybe you'd get $750,000 to and your cofounder would get $1M. But even then, chances are since you aren't retiring off of that exit, you'll probably do it again, and do you really want to have that lingering "she got more than me" feeling, especially if you might work together again? As for number two, the reasons for vesting schedules are covered elsewhere (in case someone leaves for any reason) but as for the no cliff -- I don't really like cliffs in general. You did the work, you should get the equity. The main reason to have a cliff for an employee is because it's a legal hassle to have a lot of small equity holders, so you want to prevent the folks who didn't work out from holding any equity. But that doesn't apply to a cofounder. You will already need them for a bunch of other legal stuff anyway, and having one or two extra shareholders really won't make much difference. And besides, even if they leave after two months, at least if they have shares they have a vested interest in your continued success. |