How Much Equity Should We Get?

October 12, 2018  |  By

From time to time we’ll get a client who asks us to help determine the equity split between co-founders. As attorneys to the company, it’s not our place to say who should get how much equity. But we can help to point founders in the right direction.

First rule of co-founder equity: everyone vests. This has been covered ad-nauseam, but it’s worth stating again. Everyone vests. The standard is four years with a one-year cliff. The cliff is important. Startups are really fun until stuff hits the fan. It’s good to see who can stick past that point.

Secondly, be open and honest about what you can commit, and what you expect from each other. Put your roles and responsibilities down on paper. And be specific. “Manager fundraising” is not specific. “Create a three-stage fundraising plan, identify at least 15 target investors for each round, draft initial pitch deck, and seek feedback from three people with experience in startups” is.

Finally, do your research. There are plenty of resources out there to help you determine how much equity co-founders should get. Here are two for you: Foundrs and Gust.

Once you are done, put it down on paper and then find yourself a good startup attorney to document the agreement.

Next: Beware Of Your First Investor
Posted in: Funding & Capital Raising

About the Author(s)

Kevin Vela

Kevin is the managing partner at Vela Wood. He focuses his practice in the areas of venture financing, M&A, fund representation, and gaming law.

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