How Much Equity Should I Get as a Co-Founder?
I was recently asked by a friend my opinion on how much equity they should get as a co-founder of a company. In this particular situation there were a lot of in’s, a lot of out’s, a lot of what have you’s (this is a Big Lebowski reference). In order to keep my friends identity secret I won’t go into the details. However, I think for the most part the answer is pretty straight forward. I think if you’re a ‘true’ co-founder, and your with the company from day 0, everyone should get equal share. It’s fairness that matters most at this point. Fred Wilson has a great post on this about a year ago.
No matter what you’ve done before, no matter what skills you possess, everyone in the company is taking a giant leap of faith on a project that currently means absolutely nothing. An idea is nothing, execution is everything. When people start trying to assign arbitrary numbers to unquantifiable skills you’re just asking for trouble down the road.
When I was involved in my first equity split discussion, we all went in with the adage “It’s not over until everyone feels screwed.” When I look back on how that discussion went I realize how dumb and inexperienced we all were.
The important thing at that stage in the game is that everyone feel comfortable, that they were treated fairly, and that they’re compensated properly for the enormous amount of risk they’re all taking. If people feel unfairly compensated they’re less motivated and whether you want to admit it or not, it breeds a certain level of negativity into your culture from the beginning.
On the same token, stepping up as a founder/CEO of a company and recognizing that all founding members equity should be split equally sets a mature tone, and solidifies for as a leader.
Down the road, as things get more convoluted equity discussions deserve greater thought and splits become harder to figure out. Not everyone is taking the same amount of risk as the original founders. However, if it’s day 0 and all you have is an idea floating around in space, don’t be a baby… split everything equally and move on to making those shares worth something.
