Fundraising & Investors

How should I split equity with my cofounders before I raise?

A starting point

Split it close to equal and split it before you raise, a founder who took 90 percent because they had the idea first is a red flag to investors and a time bomb with the team. Value future contribution, not who showed up first, and always put every founder on a 4-year vest with a 1-year cliff, including yourself. Get it in writing and signed. Unvested or lopsided cofounder equity will get flagged in diligence and can sink a round.

Go deeper

Hand-picked from around the web, each with a note on why it earns your time.

3 resources 3 link-checked

Read

✍️ Essay
✓ Link checked Free Beginner

Why we picked it This is the canonical case for splitting close to equal, written by a YC group partner. It arms you with the exact four reasons to hand a skeptical cofounder (or your own ego): a great company takes 7 to 10 years, so who wrote the first line of code in month one is noise; more equity means more motivation; almost every startup dies, and a demotivated cofounder is how; and Seibel's blunt line that if you won't give your partner an equal share, you picked the wrong partner.

How to Split Equity Among Founders

From Y Combinator by Michael Seibel 5 min read

  • Value the 7 to 10 years of work ahead, not who had the idea or showed up first, so small year-one differences never justify a lopsided split
  • A cofounder who insists on 90 percent is signaling they will under-motivate the person they most need, which is why investors read it as a red flag
  • If you are not willing to split equity roughly equally, that is a sign you have the wrong cofounder, not the wrong split
Open michaelseibel.com →
📄 Article
✓ Link checked Free Beginner

Why we picked it A clean, mechanics-first explainer on why every founder, including you, goes on a 4-year vest with a 1-year cliff. It spells out exactly what the cliff does (leave before month 12, your unvested shares snap back to the company) and why investors will not fund a cap table where founders own their shares outright: unvested founder equity is how they protect the round against one of you walking after the money hits.

Vesting 101: Structuring Equity for Founders and Employees

From Rho by Pia Mikhael 9 min read

  • The standard is 4-year vesting with a 1-year cliff: 25 percent vests at month 12, then the rest monthly or quarterly over three years
  • A cliff means a founder who quits early walks away with nothing, so the equity returns to the company instead of dead-weighting the cap table
  • Investors require founder vesting to keep an investor-ready cap table and lock in long-term commitment, so fully-owned founder shares get flagged in diligence
Open rho.co →
📄 Article
✓ Link checked India Free Intermediate

Why we picked it The India-specific piece that tells you where the split actually gets signed. It separates the founders' agreement (equity, roles, IP, vesting between you) from the shareholders' agreement (your terms with investors), and stresses the timing that trips Indian founders up: get vesting in writing before shares are issued, because you cannot bolt it on retroactively once the cap table exists. It also breaks down good-leaver vs bad-leaver treatment, which is the clause that decides what a departing cofounder actually keeps.

Founder Vesting in a Shareholders' Agreement: What Startup Founders Must Know

From Treelife by Treelife 10 min read

  • Document cofounder equity and vesting at or before incorporation and before shares issue, since Indian law makes retroactive vesting nearly impossible without every founder consenting
  • The 4-year vest with 1-year cliff is standard in India too, with unvested shares forfeited to the company at nominal price in a bad-leaver exit
  • Negotiate clear, objective good-leaver vs bad-leaver criteria and ensure already-vested shares are retained regardless of how you exit
Open treelife.in →

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