Article · 10 min read

How to Split Equity Among Co-Founders

Y Combinator Free Beginner

YC's counterpoint is worth hearing precisely because it pushes back on being stingy: if this person is a real co-founder doing years of work ahead of you, generosity buys motivation across a four-year vest and prevents resentment. Read it against your traction story to decide honestly whether this is a true co-founder (lean generous) or an early employee wearing the title (grant, not founder equity). It is also the canonical source on why a one-year cliff and four-year vesting are non-negotiable.

  • Most of the work is still ahead, so under-paying a genuine co-founder in equity breeds resentment that vesting stretches over four years.
  • A cliff means someone who leaves inside year one walks away with nothing, protecting you from a bad early bet.
  • Use the generosity test as a gut check: if you would not give founder-level equity, be honest that this is an early hire, not a co-founder.
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It answers 4 questions

  1. How do we structure equity when one co-founder is full-time and the other is keeping their day job for now?
  2. How do I split equity and put a vesting schedule in place at incorporation?
  3. Should I give a co-founder equity or a salary if they join after I've already started?
  4. How do I structure a startup when I have a non-technical co-founder and a technical one, so the entity and equity reflect real ownership?

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