Tue, Apr 09, 2013
Last Sunday, on a call with one of the teams I advise, the question of founder equity came up. It’s the age-old question of how you split the equity/stock between the founders of a company; how you protect yourself and the company from Sudden Cofounder Loss Syndrome (or the shake-out of it) and how you compensate team members with varying levels of commitment?
Why does this matter? Simple — I’ve been in situations where: cofounders literally disappeared (and still kept their stock); some cofounders worked their tails off while others spent just a couple of hours each week on the startup (and yet they all had the same amount of shares); consultants, advisors, service providers were compensated with too much stock and VCs refused to invest into a company as the cap table was a complete mess.
All of this is avoidable. Simply make everyone on the team earn their equity: Set up your desired end-state cap table and then put everyone’s shares on a vesting schedule. If you have people who contribute less than others simply decelerate their vesting schedule.
Everyone on your team (and that includes you) should earn their equity. It’s fair and will save you from a lot of headache later on. :)