Equity Split: Who Gets What Percentage?

Determining Founder Ownership Percentages

There is no universal "fair" equity split in startups. The distribution is a direct reflection of each founder's relative contributions, roles, time commitment, skills, intellectual property, capital invested, experience, and risk taken. Splits typically range from equal (e.g., 50/50) for symmetric contributions to unequal (e.g., 60/40 or 65/35) when one founder dominates in key areas.

Treating this as a negotiation is a mistake. Instead, approach it as a structured valuation of each person's past and future commitment to the venture's success.

Core Factors for Calculating Your Split

While online equity calculators use different algorithms, they consistently weigh a few critical variables. Use these factors as a framework for your discussion.

• Role and Responsibilities (30-40% weight): Leadership roles, especially the CEO who sets vision and fundraises, typically command a higher base percentage than functional specialists. A technical co-founder building the core product also holds significant weight.
• Time Commitment (20-40% weight): This is often the most decisive factor. A founder working full-time deserves substantially more equity than one contributing part-time. Be explicit about weekly hours and cap them in your agreement to avoid perverse incentives for burnout.
• Past and Future Contributions (10-30% weight): This encompasses the original idea, proprietary technology, patents, unique expertise, and valuable networks brought to the table. A critical distinction: treat cash contributions separately as an investment, not as a direct input for founder equity.
• Capital and Risk (Often handled separately): Founders who invest personal savings are taking tangible financial risk. This is usually addressed through a convertible note or preferred stock, giving them their money back first. Early employees who join for below-market salary also get "credit" for risk, often through a larger equity grant.

Factor	Typical Weight in Calculation	Practical Examples
Time & Commitment	20-40%	Founder A: 60 hrs/week (Full-time). Founder B: 20 hrs/week (Part-time).
Role & Leadership	30-40%	CEO/President, CTO/Lead Developer, Head of Product, Head of Sales.
IP, Idea & Skills	10-30%	Bringing a patented technology, a decade of industry-specific experience, or a key customer relationship.
Capital	Handled as Investment	$50,000 seed money is treated as a convertible note, not as a factor for a larger founder share.

Practical Scenarios and Example Splits

These examples, derived from common calculator outputs, illustrate how factors combine. They are starting points, not prescriptions.

Scenario 1: The Three-Founder Tech Startup

• Founder A (CEO): Came up with the initial concept, is working full-time, invested $50,000, and will lead fundraising. Proposed Split: 50%
• Founder B (Lead Developer): Is building the entire MVP full-time, bringing critical technical expertise. No cash investment. Proposed Split: 35%
• Founder C (Head of Marketing): Has a strong network and will drive early user acquisition, but is committing part-time initially. Proposed Split: 15%

Scenario 2: The Balanced Four-Founder Venture

• Founder 1 (CEO/Pitcher): Primary visionary and fundraiser. Split: 35%
• Founder 2 (Tech Lead): Architect of the core platform. Split: 30%
• Founder 3 (Idea & Marketing): Originated the problem space and owns go-to-market. Split: 20%
• Founder 4 (Operations/Investor): Handles admin, legal, and provided initial capital. Split: 15%

Common baselines for two co-founders are 50/50, 60/40, or 65/35, adjusted for clear imbalances in the factors above.

Allocating Equity Beyond the Founders

Your founder equity split is only the first layer. You must reserve pools for the people who will help you grow.

• Employee Stock Option Pool (ESOP): Set aside 10-20% of the company's total equity for future hires. Early engineers might receive 0.5% to 2%, while later-stage VPs might get 0.2% to 1%. This pool is created before investment, meaning dilution is shared by all existing shareholders.
• Investors: They purchase equity, directly diluting all existing holders.
  • Seed Round: Typically 15-25% of the company.
  • Series A Round: Often another 20-30%.

    Always model your ownership percentage post-dilution. A founder who starts with 50% might own only 25% after a seed and Series A round.

• Advisors: Compensate them with equity for their guidance and open doors, typically 0.25% to 1%, vested over 2 years. The value should match their specific, documented contributions.

Essential Legal and Procedural Safeguards

An agreement on percentages is meaningless without these protections.

1. Implement a Vesting Schedule: All founder equity should vest over time, standardly over 4 years with a 1-year cliff. This means if a founder leaves before 12 months, they get 0%. After the cliff, they earn 1/48th of their shares monthly. This protects the company if a founder departs early.
2. Sign a Founder's Agreement: This legally binding document details the equity split, vesting terms, roles, responsibilities, and what happens if a founder leaves (buyback provisions).
3. Assign Intellectual Property (IP): Ensure any IP created by founders before or during the company's existence is formally assigned to the company. This prevents a departing founder from taking the core technology.
4. Schedule Milestone Reviews: Agree to revisit the equity split at major milestones (e.g., after product launch, before Series A). This allows for adjustments if a founder's role or commitment changes dramatically from the original plan.

Actionable Steps to Define Your Split

Follow this checklist to move from discussion to a formalized agreement.

• $render`✓` Hold a structured discussion: Use the key factors (Role, Time, Contributions, Risk) as an agenda. Have each founder make a case for their valuation.
• $render`✓` Use an online equity calculator: Input your data into tools like the Foundrs or Slicing Pie calculator to generate a data-driven starting point. Do not blindly accept its output.
• $render`✓` Model full capitalization: Create a spreadsheet showing founder shares, the ESOP, and projected investor dilution. Understand what you will truly own.
• $render`✓` Draft term sheets: Summarize the agreed-upon percentages, vesting schedule, and roles.
• $render`✓` Consult a startup lawyer: This is non-negotiable. A lawyer will draft the proper Founder's Agreement, IP assignments, and ensure compliance with securities laws. The cost is minor compared to the risk of a poorly structured split.
• $render`✓` Formalize everything before work begins: Sign agreements before significant time or money is invested. It is much harder to negotiate fairly once one founder has done 90% of the work.

Your equity split is a foundational document of trust and expectation. By methodically assessing contributions, planning for dilution, and implementing standard protections, you build a stable foundation for the challenging work ahead.