Share Equity Between Founders In King
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Founder shares (also called founder stock) are a type of equity, usually common stock, issued to the founding members of a company immediately or soon after it's incorporated. These shares are typically granted before any outside investors come on board and establish the initial ownership of the company.
I hope it's not too late to convince you that the best way to split equity for three founders is to use a dynamic equity split that will allocate equity based on the actual contributions of the three founders while allowing for the possibility that their individual contributions will be different and may vary over time ...
There's no correct answer for deciding the equity split among founders. Often, they default to a 50/50 split or another equal distribution to avoid an uncomfortable conversation. It's an issue that can lead to big problems in a company's future if not properly aired. Sometimes a 50/50 split simply doesn't make sense.
If you started as a solo-founder and have made progress on the business (especially if you've already raised), you should consider a something along the line of an 80/20 split of founder shares. In fact, the range I'm seeing is anywhere from 5-20% for the 2nd co-founder.
The short answer to "how much equity should a founder keep" is founders should keep at least 50% equity in a startup for as long as possible, while investors get between 20 and 30%. There should also be a 10 to 20% portion set aside for employee stock options and, in some cases, about 5% left in a reserve pool.
The median level of ownership shown is 15% while the average is 20%. Note those highlighted in yellow are more recent IPOs in the past 2 years.
Different ways to split equity among cofounders Equal splits. Weighted contributions. Dynamic or adjustable equity. Performance-based vesting. Role-based splits. Hybrid models. Points-based system. Prenegotiated buy/sell agreements.
In summary, 1% equity can be a good offer if the startup has strong potential, your role is significant, and the overall compensation package is competitive. However, it could also be seen as low depending on the context. It's essential to assess all these factors before making a decision.
Generally, the choices are to either simply go for an equal equity divide or opt for a weighted split, however there is no definitive right way to proceed. Often it may depends on factors like the level of commitment, expertize or business experience etc of the parties involved.
