Choosing co-founders and dividing equity
Pick co-founders who complement your skills, share commitment, and align on vision and values. The equity split should reflect contributions, risk, and future roles.
Key selection criteria:
- Skill complementarity (product, tech, sales, operations)
- Trust and communication style
- Shared long-term goals and work ethic
- Willingness to commit time and take risk
Equity split approaches:
- Equal split: simple, good when all contribute similarly.
- Contribution-based: allocate based on past work, capital, and IP.
- Vesting with cliffs: standard 4-year vesting with a 1-year cliff to protect the company if someone leaves early.
Practical steps:
- Discuss expectations: time commitment, salary, decision rights.
- Use vesting and cliffs for fairness and to reduce risk.
- Document responsibilities and decision-making processes.
- Consider advisors or small initial compensations instead of large up-front equity for early contractors.
Use legal agreements
Draft a founders’ agreement covering equity allocation, vesting, roles, intellectual property assignment, and exit scenarios. This reduces conflict later and helps with investor due diligence.