Ask HN: Should co-founders share equity 50/50?

https://news.ycombinator.com/item?id=923904

by barmstrong • 17 years ago

3 6 17 years ago

news.ycombinator.com

There is a lot of talk on here about co-founders, but one thing I've been curious about is the best way to share equity and make decisions.

In my experience doing a 50/50 share is a bad idea for the same reason you wouldn't have two generals on the battle field or co-presidents of the U.S.: 1. Every decision has to now go through 2 people so you're slower (instead of replying 'yes' to an email you have to say 'i'll chat with my co-founder and get back to you') 2. If you ever can't agree on something, the company is at a stand still. As General Patton said, "I would rather have a good plan today than a perfect plan two weeks from now."

Is this true in your experience, and if so then how should co-founders share equity and decisions?

Thanks!

eru• 17 years ago

Perhaps you should define areas of expertise, where one of the founders has the final say. And add a shotgun clause, in case you really get stuck.

dannyr• 17 years ago

My suggestion: Start with say 5% each with 90% unallocated. The more your work on the startup, the more you gain shares.

barmstrong2• 17 years ago

i like that idea

rcmorin2• 17 years ago

There is never an "easy" way to do this. But in the early stages of your venture, there should be very few battle making decisions. Lead by persuasion and team-building. You're only 2 people and don't need a general calling the shots just yet. In the later stages, your role as CEO should emerge from your ability to lead and pursuade. Go 30/30 with vesting, add an options pool of 20% for later employees and 20% for early stage investors. If you are both starting from scratch and equally committed to the venture, the even split is fair and reasonable. But that is a conversation you should have with your co-founder and not us. Be honest about the shortcomings to your potential marriage. Good luck.

barmstrong2• 17 years ago

I like the vesting idea. Don't co-founders often disagree on decisions though? I'm not sure I agree there are fewer decisions in the early stages. Perhaps even more.

rcmorin2• 17 years ago

Of course they do. Sure, co-founders can fight over product design, what type of pizza to order for lunch, or which programming language to use, etc. But where I've seen most startups collapse and fail is over contentious issues such as splitting ownership and compensation. The inability to come to an agreement on this is when relationships turn sour and co-founders split. It's rare to hear about someone leaving a startup because s/he disagreed with the startup's product vision. Don't treat this issue lightly and get a lawyer if necessary to write up a 1 page agreement between the both of you. Things can get ugly.

Ask HN: Should co-founders share equity 50/50?

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