How do you split equity with your co founder?
Transactional Approach to Dividing Equity. Co-founders contribute time, money, ideas, relationships, supplies, equipment, and other assets. A transactional model lists the various assets each person brings to the venture. Then, after assigning value to each asset, you divide equity accordingly.
How do you allocate shares to co-founders?
Dividing equity within a startup company can be broken down into five simple steps:
- Divide equity within the organization.
- Divide equity among company founders.
- Allocate money to investors.
- Divide the option pool into three groups: board of directors, advisors, and employees.
- Create a vesting schedule.
How do you distribute founder equity to co-founders?
For a co-founder who makes considerable capital contribution, you may consider giving them additional founder shares in return. Alternatively, you can consider distributing founder equity on the basis of the individual level of work contribution (sweat equity) from each individual.
What percentage of a company should be invested in equity?
Investors: 50 to 70 percent. Option pool: 10 to 20 percent. With respect to dividing equity among individual investors, a simple formula is this, if you have to raise $3 million but the investors feel the company’s value amounts to $10 million, you should hand over 30 percent of the company to them for their money.
Should founders make up for foregone salary in terms of equity?
When founders forego a salary in the initial period, they typically get considerable ownership in exchange. Some may say that foregone salary should not be made up for in terms of equity, firstly, because it is practically impossible to settle on the correct amount of equity for the sacrificed salary.
What is the best compensation structure for a co-founding company?
Fixed salary is common for employees whereas equity sharing is more the norm for co-founders. Considering the future expectations of your company, managing a trade-off between the three compensation methods discussed above might just be superior to any other combination.