Golden Rules for Co-Founder Relationships That Grow Startups Into Unicorns

Equity Splits

Equity splits among founders can be a contentious issue. Yaniv Bernstein argues that while equal splits might work for two founders with similar backgrounds, they become less practical with larger teams or when one founder brings significantly more to the table 1. Chris Saad adds that contributions like cash or intellectual property should also influence equity distribution 2.

What would we grant to each other as founders? The next chapter is one or two of us invest in the company as angel investors, getting additional equity for that investment.

--- Chris Saad

   

Vesting Schedules

Vesting schedules are crucial for safeguarding a startup's future. Yaniv emphasizes that founders should vest their equity to prevent issues if a co-founder leaves prematurely 3. This approach ensures that the company's cap table remains intact and attractive to investors.

Founders should actually vest their equity. The assumption is they're there for the long haul, but when a founder leaves, you'll be glad you have that equity vesting.

--- Yaniv Bernstein

   

Equity Allocation

Initial equity allocation sets the tone for a startup's future. Yaniv explains that the term 'founder' often signifies an employee with significant equity, not necessarily someone who was there from day one 4. Chris highlights that the timing of joining the startup and each founder's value can influence their equity share 5.

Did four people meet in a bar and invent an idea and then go register a company together? Maybe the founding cap table is 25% each.

--- Chris Saad