03/08/2025
The fastest way to kill your startup?
Split equity 50/50 because “you’re friends.”
Because equity should be split as compensation for risk, time, and future value creation. Friendship has nothing to do with it.
So if you're stuck on how to split equity, here's the cleanest framework I share with founders:
▶ Step 1: List what each founder is actually contributing
One person may have the idea, prototype, full-time commitment.
The other may join 3 months later, still working another job.
If the split doesn’t reflect that, resentment compounds fast.
So, start with listing the contributions.
▶ Step 2: Assign weight to each factor (out of 100%)
And base it on how each factor will impact revenue 3–5 years from now.
For example:
- Time commitment = 25%
- Domain experience = 10%
- Ex*****on = 30%
- Fundraising = 20%
- Sweat equity = 15%
Keep it honest. This isn’t about feelings - it’s about future value.
▶ Step 3: Adjust for risk taken
Not just who “quit their job.” But who’s going all-in with time, energy, or personal capital - from Day 1.
Higher commitment = higher equity. Simple.
▶ Step 4: Add a 4-year vesting schedule
A vesting schedule means equity is earned over time - typically with a 1-year cliff to protect the company from early exits.
So if someone leaves in month 6, they shouldn't walk away with 40% of your company.
I’ve seen founders delay this conversation till the first term sheet.
By then, it’s already too late.
Remember, a clean split isn’t just about fairness - it’s about team survival.
What’s one equity mistake you’ve seen that others should avoid?
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Mjf Lion Sanjay Khivesra, Alumni IIMCalcutta, Chennai
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