How Much Equity to Give Your Cofounder - Michael Seibel

TL;DR

Equity splits should maximize cofounder motivation, not reflect negotiation. Four-year vesting with a one-year cliff protects the company if a cofounder leaves early, allowing the CEO to be more generous. Generous grants create long-term ownership mentality, which is more valuable than a stingy split. If a cofounder is not worth a generous grant, reconsider their role.

Key insights

• Most founders miss that equity splits are the primary tool for motivating cofounders to stay through the years needed to build a large company.
• Co-founders often underestimate the time commitment; the CEO must think about their long-term interests even if they do not.
• Negotiation-based splits are a fallacy; the CEO’s goal should be a split that maximizes teammate motivation.