<story><title>The only wrong answer is 50/50: Calculating the co-founder equity split</title><url>http://www.geekwire.com/2011/wrong-answer-5050-calculating-cofounder-equity-split</url></story><parent_chain></parent_chain><comment><author>webwright</author><text>I&apos;m in the &quot;thought provoking post, but disagree!&quot; camp on this one.&lt;p&gt;As a guy who has been the CEO for most my startups, I&apos;d NEVER say that I deserve more equity because of that.&lt;p&gt;Also, 5% for the IDEA? Jeebus. Is THAT idea the source of your eventual triumph? Or is it the 100 ideas that come later? If you pivot from your idea 6 months down the road in a direction your co-founder suggests, does he get a portion of that 5%? Or perhaps more, because it&apos;s your (now shown to be a bad) idea that wasted 6 months?&lt;p&gt;I DO agree that you need rules for who wins when a disagreement can&apos;t be resolved-- you can have those rules without handing over equity. You should also have rules for dissolution.&lt;p&gt;Co-founders are a market like any other. With these rules, and with Dan&apos;s outstanding reputation, I have no doubt that he could land a co-founder. But it&apos;d always be a lesser co-founder than he COULD get. Minority shareholders are also more likely to bolt/get grumpy when things get rough.&lt;p&gt;In short, Dan&apos;s trying to maximize his personal wealth in the (exceedingly rare) event that the startup wins (sees liquidity) rather than maximizing for the company&apos;s chance of success.</text></comment>
<story><title>The only wrong answer is 50/50: Calculating the co-founder equity split</title><url>http://www.geekwire.com/2011/wrong-answer-5050-calculating-cofounder-equity-split</url></story><parent_chain></parent_chain><comment><author>vessenes</author><text>This post is wrong. The central issue around equity splits is preserving equanimity and founder happiness as long as possible, in as wide a variety of situations as possible.&lt;p&gt;That is the fundamental purpose of a co-founder equity split in fact -- to allow founders to happily sacrifice and risk for corporate value building.&lt;p&gt;The niggly thises and thats this author suggest may be arguably fair day 1, but they miss both the psychology of nerd co-founders (or a nerd and a business guy), and they take absolutely nothing about the future into account.&lt;p&gt;Anyway, if this works for you and your team great, but I would bet 10:1 that with Joel&apos;s rules, the amount of time you spend fighting about equity in your first year is close to zero, definitely measured in hours.&lt;p&gt;With these rules, you will probably spend that long agreeing how much each of the multipliers is worth day two of your new startup, not to mention re-jiggering when some low-percentage (by this setup) co-founder has the actual big idea that gets you launched.</text></comment>