What Founders should consider when splitting Equity

You can’t have your cake and eat it, huh? Same applies when it comes to you being a co-founder. There is equity to be shared depending on the number of founders that exist. While doing so, it is important to share equitably and not equally. Not sure of h0w to start? Well… have a look at these few guidelines.

1.Who is the CEO?

The one in charge of overseeing the entire business would probably have a higher share when splitting equity… or not. It all depends on how you choose to operate your business. Mutual understanding is of the essence.

2. Who had the original idea?

It might appear that the one with the original idea carries the day. However, there are circumstances where his/her interest gets overpowered and the rest of the founders seem to be more in charge especially when it comes to implementation. Admit it, great thinkers are not necessarily great implementer. So, did the brain behind it join in the race or stepped back a little bit. If they did how much credit would they earn?   

 3. If you could magically hire employees, would one of the founders become their manager, and if so, who?

Ultimately, this looks at who is more capable of managing people amongst you. This would probably be the one who seems to be a bit level-headed and relates well with people. They could have a background in HR or not, but most probably has an inbuilt skill in resolving conflicts too. How much should the office mediator earn?                   

4. If this founder left, would it severely impact your chances of raising funds, pitching investors and development schedule?

Honestly, if you have that one person who brings a much bigger piece of bacon, you better do all you can to have him/her comfortable and willing to stay. This is probably a good negotiator and knows how and which strings to pull. Such a founder would deserve much. Additionally, if you’ll fall behind schedule when they leave they probably have much say in the business and worth a tidy sum.           

5. Who writes the blog and the marketing copy that goes on the site?

This is the one who helps put the face of the company out in the public domain. Coming up with features and making sure that the content available is more attractive to potential customers. They hold the bait through their blog posts and presentable outlook of the site. You could choose to weigh how many more clients you get through this platform in order to calculate the equity such a founder deserves. It might seem that they spend much of their time on the desks and laptops instead of going out there to bring clients, but it’s really more than that.                                            

6. So far, who pays for basic business expenses like printing business cards, web hosting?

This is the guy who ensures that the minimal operations of the office are taken care of. If they left, would somebody else easily fit in? They know that you prefer coffee to tea so it’s in plenty. They are there to ensure that when somebody logs in on the site, no matter what time of the day is as you enjoy your much needed sleep, they are able to access information since the website is up and running. Without them, the office is in a mess.

Having satisfied these questions, you can now embark on splitting the equity in the company. No idea how to come up with that agreement? Have a look at this Founder Equity Sharing Agreement.    

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