Ask HN: Co-founder equity question: Always even split? | Hacker News Reader

Ask HN: Co-founder equity question: Always even split?

3 pointsengdinn8 comments

Assume "Joe" founds a startup, works on it for several months, writes the code, and gets the website up and running.

Then, Joe finds a biz-dev cofounder. They are deciding the equity split.

Should Joe and the cofounder split the company evenly, or does the fact that Joe founded it and worked on it for several months mean that Joe gets more?

What's the etiquette/precedent for this?

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Pretty sure Joe gets more equity here. Joe had the idea, wrote the initial code, and has stuff up and running. I'd guess the split here should be 75/25 if Joe worked on it full time.

If I were the biz-dev cofounder, if Joe gave me 50%, I would ask "why the charity?". In fact, I'd flat out be suspicious.

http://startuplawyer.com/incorporation/how-to-split-the-star...

I'm not sure I'd be suspicious. Many programmers aren't particularly savvy at business negotiation (hence the need for a biz-dev co-founder).

The percent split is up to you guys. I think you should choose what the two of you think is fair to both sides. If this were my company and I were bringing someone onboard 1 year later, I would be thinking about the vesting schedule and possibly using cliff vesting.

http://startuplawyer.com/incorporation/why-your-startups-fou...

All things being equal I wouldn't expect 50/50, but there are a lot of variables to consider beyond a simple time measurement:

Does the cofounder have amazing skills or other benefits to the company so that he's worth more than might be expected?

Has Joe been kind of slacking this entire time, not having done much work or taken much risk, while the cofounder expects to put in hundred-hour weeks and is quitting a high-paying job to take the offer?

I think the line that rings truest for me here is "here are a lot of variables to consider beyond a simple time measurement"

Interestingly enough, one of the reasons i enjoy startups, is because it enables one to make decisions that are less constrained by big company style black or white parameters. I.e. When share options are discussed in a big company, the deal is often seen as a zero-sum one. If A gets more shares then B gets less. A gets wealthier and B does not.

In an ideal situation (that is far more visible at small companies and startups), giving A more shares could well result in increased value for B too (since the company value without A drops dramatically).

In an attempt to answer the question somewhat better though, i would suggest you ask yourself not "what have i done till now", but instead, "how critical to our future success is the new guy".

There is no rule for how to divide equity. You would divide the shares based on whatever you feel is most appropriate, generally considering time and effort invested by the current founder(s), and the value that the new employee(s) bring into the mix.

If you think about it in the grand scheme of things 'a few months work' is basically a rounding error in terms of all the time and effort that will go into building a company.

The amount of equity the new cofounder receives should be such that the value of Joe's equity is substantially greater after the split than before.

I don't think etiquette/precedent is the important issue.

FWIW, it's the biz-dev cofounder that is asking for 50/50. Joe thinks he should get more than 50.

Also, Joe has been full time on the startup and the biz dev guy is only part time on it.

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