Splitting Equity with co-founders, early hires, or investors might feel like a casual handshake at the beginning, but its one of the most critical decisions you'll make in your startup journey. Get it wrong, and you could face resentment, legal headaches, or even the collapse of your business. Get it right, and you'll build a strong foundation for long-term success.
Here's how to avoid equity-split regret down the road:
1. Don't Default to an "Even Split"
It's tempting to split equity 50/50 (or 33/33/33), especially when everyone is excited and optimistic. Fair doesn't always mean equal. Ask:
Equity should reflect contribution- past, present, and future.
2. Factor in Future Roles
Think beyond today. Whos going to:
Weigh equity accordingly, not just based on what's been done, but what's expected going forward
3. Use Tools to Model Scenarios
Use a platform or spreadsheet to stimulate how the equity pie changes over time with:
This turns emotional conversations into data-backed decisions.
4. Put Everything in Writing
Handshake deals break. Protect the business and relationships by formalizing everything early:
Its not just smart, it gives future investors peace of mind.
Final Thought: Your equity is one of the most valuable assets you have. Treat it with the same strategic thought you'd give to your product or go-to-market plan because it's gone, you cant get it back.
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