#EquitySplit #startup #Founder

Equity Split between Co-founders

While deciding on equity split between co-founders, inequities in holding arise due to the following reasons:
- One is older or more experienced than the other
- One thought of the idea and the other joined months later to help with execution
- One raised a few lakhs from angel investors before getting the other on board
- One took a few months of salary while the other did not
- One built the MVP and the other came in after

While all of these reasons are justified and may require an inequitable split in equity, one should also take the following into consideration when deciding how far wide the split should be:

1. a startup reaches success in 7-10 years, and a few months of initial work may not justify a difference during that tenure

2. startups are valued more on execution than on just the idea

3. over 60% of startups fail at some point due to disagreements between co-founders

4. you do not want the co-founder to feel less motivated to work if the startup crosses maybe like, the 4-5 year mark

5. your co-founder will not be valued by others if you don't value them equally - it may impact how seriously they consider their orders, or decisions over yours even for departments that otherwise completely rest with them

Not strictly financial advice, but just considerations to think of before agreeing on an equity split.

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A Chartered Accountant with about 10 years of experience in areas of Tax Advisory, Startup Consulting, Fundraising, Audits, Deal Advisory, Business Modelling and contract CFO services.

Winner of the ISB Young Leader Award 2017 and the Best All Rounder, PGP Class of '17, Sarthak has also been published about in the leading financial newspapers such as The Financial Express as possibly the youngest Indian to have completed the courses of CA, CS and CMA along with a graduate degree in Financial & Investment Analysis from University of Delhi, all by the age of 23 years.

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