What startup founders need to know about splitting equity

Startup attorney Charlie Sommers of Founders Law breaks down one of the most consequential early decisions founders face: how to split equity with a co-founder. From vesting schedules to contribution-based models, this guide covers the frameworks that protect both the company and the relationship.

This guest post in the What Startups Need to Know series comes from Charlie Sommers , a startup attorney at Founders Law. Charlie works closely with early-stage founders to navigate everything from formation to fundraising, and brings a sharp, founder-first perspective to the topic of splitting equity . There are many benefits to working with a co-founder while trying to launch and scale a startup. You may find that you work better in a team, and believe that the combination of your skill sets will lead to faster traction or a better reception from customers. Additionally, you may want to be attractive to VCs and angel investors, who often prefer to invest in co-founder-led teams. It is important to remember that co-founder relationships are nuanced. While co-founders should have a shared goal of growing their startup, each has individual interests that can either advance or hinder the business mission. In my experience, co-founder disputes are the number-one reason that early-stage startups fail. In Harvard Business School professor Noam Wasserman’s book The Founder’s Dilemma , Wasserman writes that 65% of high-potential startups fail due to co-founder conflict. The high-stress nature of a co-founder relationship can turn combustible, with high-profile founder disputes driving headlines at companies from Snapchat to Facebook . One topic that co-founders need to agree on is how to split equity . The decision on how to split equity is stressful, as it is both very personal and can have significant implications for each founder individually. But having complete faith in a mutual decision is essential for the long-term health of the co-founder relationship. All else being held equal, I often advise co-founders to split equity equally (e.g., in the case of two co-founders, 50/50). Giving each founder half of the pie allows them to be true co-adventurers while working together to achieve their business goals. This seems to be the most agreeable outcome for most founders

By TechNexus Venture Collaborative at TechNexus Venture Collaborative