Equity Split between Co-founders
While deciding on equity split between co-founders, inequities in holding arise due to the following reasons:
- One is older or more experienced than the other
- One thought of the idea and the other joined months later to help with execution
- One raised a few lakhs from angel investors before getting the other on board
- One took a few months of salary while the other did not
- One built the MVP and the other came in after
While all of these reasons are justified and may require an inequitable split in equity, one should also take the following into consideration when deciding how far wide the split should be:
1. a startup reaches success in 7-10 years, and a few months of initial work may not justify a difference during that tenure
2. startups are valued more on execution than on just the idea
3. over 60% of startups fail at some point due to disagreements between co-founders
4. you do not want the co-founder to feel less motivated to work if the startup crosses maybe like, the 4-5 year mark
5. your co-founder will not be valued by others if you don't value them equally - it may impact how seriously they consider their orders, or decisions over yours even for departments that otherwise completely rest with them
Not strictly financial advice, but just considerations to think of before agreeing on an equity split.
