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Practical advice for cyber security entrepreneurs. Learn from our experience.


How Should Founders Split Equity?

It’s no secret that it will take you and your co-founders 7 to 10 years to build a company of great value. Clearly you have to prepare for a marathon, not a 100-meter sprint. One founder may contribute more during the first year, and another may bring greater value in the third year, but in this important relationship that ebbs and flows, it’s critical to avoid unbalanced founder equity splits.

Petty justifications like “I came up with the idea for the company,” or “I started working x months before my co-founder,” are all irrelevant and can lead you to make the mistake of splitting equity unfairly and damaging the co-founder relationships that are so fundamental to the success of your company.

Ultimately, start-ups are about execution, not ideas. Equity should be split equally because all the hard work is still ahead of you. No matter who did what over the first few months, there is a good chance you will all contribute equally, in different ways, in the end. One will take care of funding, another sales and partnerships, and yet another technology. You must remember: more equity will lead to more motivation, more sweat, and more commitment during the good, the bad and the ugly. The more motivated the founders, the higher the chance of success. Getting a larger piece of the equity pie is worth nothing if the lack of motivation on the part of your founding team leads to failure. You are all in this together.

Another way to look at it is to consider the founders as the tier 1 team inside your company. Outsiders, especially your Investors, will look at founder equity to determine how much you value your co-founders. If you give a small cut to a founding member of the team, it may give the impression that since you ‘value’ that person less, he or she is going to contribute less to your business. You want to communicate to investors that you have a team that you highly value, equally and individually!

Do it the right way: Equity should be split equally among co-founders.