How Do You Determine The Distribution of Equity Among Co-founders When Starting A New Company?

There are many factors, and it is too complex to offer a standard answer. You need to hire a consultant that is a CEO/Founder with lots of experience to discuss things for 1–2 hours.

One way around this is to set hourly rates for the founders and track time to allocate it according to contribution. Shares are earned with seat equity. A simple spreadsheet with monthly invoices submitted by everyone is easy to do. There are plenty of software solutions for this too, but likely best only when it gets complicated with many founders.

People and Founders are never “equal” in what they bring to the table. So, splitting 2 or 3 ways is not usually an unfair solution.

Factors to consider:

  1. Relative time and contribution to sweat equity - some may do little and others may work full-time or more. That is why tracking hours and market rates works well.
  2. How much capital will be needed and will Founders contribute? S
    • Always separate purchased shares from “Founders...
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