I was chatting with an early startup team yesterday and they had a reasonably common question, which I will answer here for benefit of others in similar situation: What should one do about equity split in a team of X where one is clearly the junior partner?
-
-
Separately from questions of fairness, perceptions of fairness also matter. You do not want, 18 months from now when going through a periodic tough time, for one founder to constantly feel like their efforts are “worth less” and wonder if they should just push reset button.
Show this thread -
“What if they’re not critical to the enterprise?” In most cases I will disagree with this, but I can imagine circumstances where e.g. they get a market salary from day one sourced out of revenue from an existing business or savings or money raised on a handshake previously.
Show this thread -
In one of those circumstances, you might have a “generous for an early employee” grant, but you have to be really, really clear between the N of you about the cofounder/employee distinction because people are going to ask and it really matters in some social situations.
Show this thread -
I am not thrilled about this, but in consensus SFBA culture, there is a pretty titanic gulf between last co-founder and first employee regarding questions like “Should an investor or prospective investor ever desire to talk to you 1:1?”
Show this thread -
(There is also a gap on that particular question of “CEO vs. any other cofounder” but if an investor talks to co-founding CTO w/o telling CEO that is cool but if they talk to employee CTO they *have transgressed.*)
Show this thread -
A thing about generous employee grants: professional money had definite views regarding the total employee allocation (options pool) and overspending on employee #1 will often result in them advocating for revisiting that decision later.
Show this thread
End of conversation
New conversation -
-
-
@danshapiro spends some time talking about this in his book. I dont remember details but I’d revisit it if I found myself in a situation where going with “even split” wasn’t obvious. -
I don't believe in the default 50/50 split. This article outlines the argument against it:https://www.geekwire.com/2011/wrong-answer-5050-calculating-cofounder-equity-split …
End of conversation
New conversation -
Loading seems to be taking a while.
Twitter may be over capacity or experiencing a momentary hiccup. Try again or visit Twitter Status for more information.