Founder’s Pocket Guide: Founder Equity Splits
“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 well being of a startup. Founders typically sacrifice numerous other life opportunities to work on a startup effort. In exchange for that sacrifice, a founder wants to feel that 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.
Download the Equity Splits Workbook File
Table of Contents
1. In This Pocket Guide
- Deciding Who the Founders Really Are
- Reviewing Equity Split Methods
- Using Vesting Schedules
- Answering Common Equity Split Questions
- Documenting Your Equity Split Decision
- What This Guide Does Not Cover
- Founder Pro Tips
- Get The Equity Split Workbook File
2. Founder Equity Splits
- Founder Equity 101
- Three Rules for Founder Equity Decisions
- When You Need To Decide
- The Process For Deciding Equity Splits
3. The Founder Test
- Key Elements of The Founder Test
- Take The Founder Test
4. Equity Split Methods
- In Defense of Equal Equity Splits
- Unequal Equity Splits: Using The Equity Split Scorecard
5. Vesting: Earning Your Piece of the Pie
- Vesting 101
- Founder Vesting Schedules
- Documenting Vesting Progress
6. Common Equity Split Questions
- The Big Idea
- The Founder-Investor
- Equity for Code (or Other Services)
- Work Already Completed by a Solo Founder
- The Part Time Founder?
7. Putting Your Equity Agreement in Writing
- Using a simple letter to document your agreement
- After Incorporation and Other Formation Tasks
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