Equity splits for startups: How to divide ownership fairly

Frequently Asked Questions

Why is a 50/50 equity split often a bad idea?

50/50 splits create decision deadlock when founders disagree, since neither has the authority to break ties. They also ignore the reality that one founder typically contributes more, takes more risk, or has more critical skills. Many investors avoid 50/50 companies because they signal potential for operational paralysis and lack of clear leadership.

What factors should I consider when splitting equity with my co-founders?

Consider full-time vs part-time commitment, opportunity cost (what each founder is giving up), role and skills, capital contributions, network and relationships, long-term commitment, and founder-market fit. The initial idea matters less than most people think—execution is everything. A fair split weighs all these factors together, not just one or two.

How much more equity should the CEO get compared to other co-founders?

If one founder will be CEO making final decisions, that's typically worth 5-15% more equity than a co-founder in a non-CEO role. The exact amount depends on other factors like skills, commitment, and contributions. Leadership responsibility and decision-making authority are valuable and should be reflected in ownership.

What's the right way to have the equity split conversation with my co-founders?

Start by having each founder independently list their contributions (time, skills, past work, capital, network, risk). Then discuss future roles and who has decision-making authority over what. Share individual perspectives on fair splits with reasoning, negotiate toward alignment, and document everything immediately in a shareholders' agreement with vesting.

Should I use a dynamic equity model where ownership changes based on contributions over time?

Dynamic equity works best for very early-stage teams still figuring out commitment levels, but most companies settle on fixed percentages fairly quickly. While it adapts to changing contributions and feels fairer when commitment differs, it creates ongoing tracking burden, feels transactional, and investors often dislike the uncertainty. Fixed equity with vesting is typically the better choice once you have any company complexity.

What happens if we've already been working together before discussing equity?

You need to backdate the conversation and value past contributions appropriately—don't just "split equally going forward." Quantify what was done: hours worked, value created, risk taken, and whether you would have hired someone to do that work. The person who worked before the equity discussion deserves recognition for that contribution.

Can I give someone 40% equity but 60% voting control?

Yes, equity percentage and control aren't the same thing. You can structure different share classes (Class A with 10 votes vs Class B with 1 vote), use shareholder agreements that give one founder decision-making authority, or set board composition to give control regardless of ownership. Your shareholders' agreement should clearly document both ownership percentages and decision-making processes.

How much equity should I give someone joining as a co-founder after incorporation?

Give meaningful equity (10-25% typically) but less than original founders received, since your company now has value and early equity was cheaper. Implement vesting with a shorter cliff (3-6 months vs 1 year) since they're joining a going concern. Be honest: if you're offering 5%, they're an early employee with a fancy title, not really a co-founder.

What are the red flags that our equity discussion is going wrong?

Watch for "let's just do equal and not argue" (avoiding the issue), "we'll figure out exact numbers later" (procrastination), extreme contribution claims suggesting you have a founder and employee rather than co-founders, one person refusing to engage in discussion, or emotional manipulation like "if you don't give me 50%, you don't trust me." These signal deeper partnership problems.

Do I really need to document our equity agreement legally?

Yes, you must document everything immediately in a shareholders' agreement—verbal agreements fail and handshake deals lead to lawsuits. Include exact ownership percentages, vesting schedules, decision-making processes, transfer restrictions, and what happens if someone leaves. The cost of proper documentation (€500-2,000) is trivial compared to tens of thousands in legal fees from founder disputes or company failure.