How Much Equity Should You Give Your Cofounder? (via Michael Seibel)

by Scott Edward Walker on June 30th, 2019

To Our Clients & Friends: Welcome to our weekly series “Helping Entrepreneurs Succeed.”  Each week (or two), we share a favorite video clip of a successful entrepreneur, investor or business leader on a variety of topics.  This week, we present Michael Seibel, CEO and a partner at Y Combinator

In this brief video from a few weeks ago, Michael shares some solid advice with respect to how much equity to give your co-founder(s).  Here are a few highlights:

  • “Your first thought has to be, ‘how do I come up with an equity split that is going to maximize the motivation of my teammates’.” (at 1:15)
  • “Your primary mechanism of safety when it comes to giving equity is vesting and a cliff.”  (at 1:32) [You can also see my posts: “The Importance of Vesting Schedules for Founders” and “The Importance of Vesting Schedules – Part 2”]
  • “It probably benefits you more often than not to be more generous with the equity that you give your cofounders, not less.” (at 2:24)
  • “I think all things being considered, equal is a nice and easy rule of thumb, but it can’t be applied always.” (at 3:25)

In case you’re interested, I wrote a post a few years back with respect to the various factors to consider in connection with equity splits.  Moreover, from a legal perspective, a 50-50 split between two co-founders can be problematic due to control/deadlock issues (e.g., the stockholders elect the Board, and the Board appoints the CEO).

If you have any questions with respect to the foregoing, please feel free to email me directly at . Cheers, Scott

Comments are closed.

Secured By miniOrange