How to Divide Equity Between Co-Founders in a Startup
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- Опубликовано: 29 июн 2024
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1. Financial investment
2. Sweat equity
3. Experience level
4. Intellectual property (idea, paper work etc)
5. Consistency
FINALLY Someone with an easy breakdown that I understand in less than 6 minutes! I am now hooked to your channel.
Hello how are you
This answered ALL my questions on this subject. Definitely sending a fan contribution your way when I can!
Thanks so much! I'm glad I could help!
Amazing! You answered most messed up of all my YC Questions.
Thank you cate, it is very helpful for my start up and you are soo.. beautiful.
Thank you so much
This is exactly wat I was looking for
Thanks for the valuable information
You're welcome!
Wonderfully useful, Cate! Thanks.
You're welcome!
Excellent Information and presented very clearly.
I found this clip today and really it was engaging towards the topic
There are others but you did it best.
Please do explain in a video about different agreements related to equity sharing for example Non Disclore Agreement and others.
Am from India
A clear and informative explanation and a beautiful host!
Thanks for the info. Adding more real life scenario would help greatly.
Thank you, Captain Cap
Thank you Kate :)
Peace… Shalom… Salam... Namaste and Thank You for All that you are doing to Heal our Mother Earth 🙏🏻 😊 🌈 ✌ 🌷 ☮️❤️
Thank you, very informative ...
You're welcome!
Thanks, great video
You're welcome!
Thank You ☺️
Really helpful 👌
Thanks good info
Hello Cate !! This video is very useful as we are creating a startup . Can u please give me some tips to split equity between founders and investors ??
She is so smart and beautiful…i wish i could start a company with her as a co-founder and then marry her . How lucky and perfect it would !
Your new subscriber from Ukhrul.
Thanks for the advice.
You're welcome :)
Very informative. Thank you! =D
You're very welcome!
Great video. A business adds new owners over a ten year span. The business changed value over that time. We need to figure out how to measure equity and share value ten years in. Who owns what percentage of the business? Is it share, stocks or equity we are measuring? Here is what I have and need advise on.
Person 1 started the business in 2012 and invested $25k. In 2018 he self evaluated the business at $144k, he added a new minority owner to the business for more capital and help. They bought in at $10k. A year later, he self evaluated the business at $200k, then added three more owners at in for about $8k each. We are struggling to figure out ownership. Some owners put in way more time and resources than others. How do set this up in an equitable way to keep everyone's stake fair?
Great job! #2020
I got in love
What do you think about this situation? If the investors plan to put $1m dollars over a vesting schedule of 4 years. .
Should the money be split into 4 years? Eg: $1million/4years = $250,000 per year?
Nice Video. Can you please explain how to share the equity if I am a single founder of the company. Should I keep 100% equity of my company with me or should divide it between me and the company employees. Thank you
That's not a question I can answer for you. It depends on many factors related to your company and its structure as well as your personal preferences. I recommend talking through the options with a mentor or advisor.
I am a co-founder, all was my own idea and skills gained frm different F&B Industries bec my two other partners are new on this kind of business. I had no cash contribution but they promised me 10% monthly base on gross. I work as operation manager in that business and never demand for the right compensation hoping for my equity is enough. We dont make black & white. In 1st month we already gain the ROI. My problem is they told me now that they will give my equity after 5 months of operations ! Is it fair? Am I have a right to demand to shorten it? I'm so confused, disappointed and unmotivated now, what should I do?
Hey am launching new tech company and I was working on it like almost two years doing research, I have made different negotiation, writing business plan etc and now the remaining part is to get investor how much share should I give to the investor? All those time I was using time and money. Can I offer the investor 20% because the investment will have significant profit
Hello Cate. I liked it very much. Would you make a video on the same topic with an example of some XYZ company or even a real company? Here is my case: At first place I am searching for two co-founders and it is bothering me how should I share my equity with my future co-founders. I have almost made my product ready single-handedly. But I still need very intelligent co-founders. What steps should I take now? (I have not registered any company yet.)
That's not a question I can answer without additional info as it's very situation specific. You need to work through that analysis on your own or with an advisor or consultant. A tool like this: foundrs.com/ can maybe serve as a starting point but you really need to do your own analysis based on the specifics of your company and its needs.
Forget everything she said and just use "The Grunt Fund" from the book Slicing Pie.
Hey Shikhir, i just got the book and its amazing. But i can't seem to understand how the pay back of returns for the PIE'S of the co-founders and other partners who invested their time, cash and other resources to the start-up, when the company starts making money.. Do you convert the promised equities (PIE'S) to real equities from there?.. maybe some average PIE ratios from the different month's of the "gap phase"?? And if so how do you do that since the pie's seem to vary depending on the month?
Thanks in advance fro your reply!
And never think like want to work with startup B bcz they offered me 5 or 10 percent more equity then statup A! Because equity split is leaner and statup growth is exponential. Moreover if statup fails, those percent don't matter. So only one should choose to work in a statup based the growth prospects only..
What a great video!!! I recently just helped startup a construction business. I have a lot of questions that I need to ask you! Could I discuss them through email please?
Thanks! You can definitely shoot me an email but I don't want to list it here because then I'll get spammed. Information on how to contact me is available on my website: www.catecosta.com.
Great tips. I was expecting some sample "typical" % distribution. Still great content. Kudos
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Hi Cate, I have two questions.
1. For example If the company has 2 co-founders both 50% each and the vesting schedule is 4 years to get their full 50% shares meaning each cofounder will get 50/4 = 12.5% per year right?
2. And what if a cofounder leaves in a year, should he sells back the 12.5% shares to the company? And what if he didn't?
Yes, unless you have a cliff that doesn't kick in until later, after year 2, say. A typical set-up would be 4 year vesting with a 1 year cliff, meaning you'd get nothing until you were there for a full year but then you'd vest monthly in years 2-4. It's possible, however, that you have a 2 year cliff and then you'd still have no equity after year 1 because nothing would vest until the end of year 2. It all depends on how you've decided to set it up.
Thanks for the answer Cate. Ok say 1 year cliff, Co-Founder1 works till 13months, he should be getting 12.5%. And he leaves the company. What will happen?
That totally depends on what the vesting contract says. I can't tell you definitively what happens in any situation because it all depends on what was written into the legal agreements. Typically, however, if someone has a 4 year vest with a 1 year cliff and stays for 13 months they'd be paid out for 13 months worth of equity; in your example, that would be 13.54%. He'd get the number of shares that matches 13.54% of the company.
Great. Thanks.
You're welcome!
Any business group chats
is sweat equity legal ? or promoters have to define remuneration and convert it into paid up capital ?
I want someone to partner me in my business
My views..
# if any investment is made by any founding member, look at it strictly as the angle investment and give that perticular amount of share to the founding member basd on the current valuation of the company all of you agree upon.
# Discover what are the real challenges of the company. And alot the share for those woks. Say for some startup sales is challenging and for some tech is challenging.
# now assign the share to the members based on their roles. Since we had discovered what role is challenging.. now it should be easy to distribute on that basis. ( Or we may confuse ourselves with the respect we have for a person, with the share he/she deserve based in their participation.)
# keep one year cliff for all founding members.
# Idea matters. And the importance that should be given to it depends on how unique and special that idea is and how crusul that idea was for building your company. (Imagine working on a bad Idea! Even Google has failed in some projects with bad ideas.)
Cate Costa looks pretty. 😊I’d like her to be my co founder.
Basically four things, cash, sweat, experience and idea. Not in any order.
Watched the video twice.. The first time, was lost thinking how beautiful you are 😁
me and my friend started a business. he invested 10k US $. and rest of every thing is mine... idea, business plan, execution, every thing. then how much equity I should give him??
That's not a question that I can answer with the information given. There are too many variables to consider when dividing equity for me to be able to provide any type of advice based on a one sentence description. Additionally, you're saying "invested" past tense as if you've already accepted the money. You definitely should have determined the equity breakdown BEFORE you accepted an investment from anyone.
actually at that time we hadn't decided because we decided to work together and we both were founder but now he is not working with me. so based on his investment I want to give him some amount of equity.
Cate Costa thanks for reply
Even if you were both co-founders, you should have sorted out the equity piece before beginning. This is one of the major mistakes that new entrepreneurs make and it creates lots of headaches for them down the line. Always, always, always decide how things will be split up before working with anyone or accepting an investment from anyone or you're going to create trouble for yourself down the line.
Unfortunately, as I mentioned, I can't make any recommendation to you about how to split up the equity because I simply don't have enough information. If you'd like to make an appointment with me to discuss all of the details and get my recommendation, please do so through my website.
that's what the only mistake I have made... I'm from India... and thank you very much for your time... all your videos are very helpful...
Read slicing pie.. you have taken this from mike
Please use some mathematical explanation.
*You are Really Cute*
Hi Cate!
There IS a "right way!" It's called "Slicing Pie" and it's a simple formula that allows founders to determine a perfect split. All of the variables you mentioned can easily be accounted for in the Slicing Pie model including salary levels, ideas and money. Additionally, it provides much better protection than a vesting schedule. I'd love to share a copy of the Slicing Pie book with you if you contact me: www.slicingpie.com/contact.
-Mike
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