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Dividing up the equity between you and your team should be relatively straightforward. However, I’ve seen too many startup CEOs make the same mistakes over and over again. And some of these mistakes can really hurt your startup.
I don’t want that to happen to you. Based on my own experience dividing up equity in my company and helping too many startup CEOs fix the mistakes they’ve made, I’m going to share with you the ten most likely mistakes you’ll make dividing up your equity.
Let’s get started and let’s start with the most important one on my list, number one.
1. Your equity doesn’t vest over time
Imagine this scenario. You’ve divided the equity between you and your co-founder in a fifty fifty split. Then, your co-founder quits three months after you start.
So, unless you have vesting period for the stock, your co-founder that just left the company now owns fifty percent of your company. Of all the self-inflicted wounds you can give yourself, not having the equity you give, especially to you and your co-founders, vest over time, is the biggest.
The reason this is such a big issue is that over 50% of founder relationships fail. The answer is you should have your equity vest over time.
