How to Divide Up Your Company's Equity

We get a lot of questions about dividing equity and for good reason. Dividing up your startup's equity creates a lot of heart burn for all of us. It's a tremendously stressful affair if you have never done it before.

The answer below compiles some of the best questions and answers related to equity.

Joel Spolsky has a wonderful mantra on equity:

Fairness, and the perception of fairness, is much more valuable than owning a large stake. Joel's equity dividing answer to this question offers what we feel is a comprehensive answer to this nagging equity question.

If you find yourself wanting to ask an equity dividing question, please read Joel's answer first before posing the question. It's chock full of useful information and has a wonderful example to guide you through the process.

Additional Equity Questions and Answers

If Joel's answer does not answer your equity dividing questions, then take a look at a couple more questions that dive into different aspects of equity, founders and working for stock.

• Amount of Equity to Retain as a Key Founder : Is a discussion about different levels of work effort and how they should be rewarded with equity
• Redistribution of Equity At Each Stage of Growth : Discusses dilution and how that happens with investment and growth
• Equity For Specific Performance Metrics : This was a lively discussion about how to award equity when certain performance metrics were met.
• Fair Equity Splitting Between Two Founders : This one deals with a common dilemma on how to split equity between two founders when they perform different roles.
• Changing Your Equity Structure : Explores what happens when your equity distribution needs to change or be revamped completely. It investigates vesting plans and the sticky problems with "when one founder works harder than the others."
• Equity based on actual contribution : This question addresses an approach that many cash starved bootstrappers & hackathon graduates face: How to dynamically assign equity for contributions. Mike Moyer offers a grunt fund calculator in spreadsheet form that can help set, track and assign equity based on participation & contribution.

If you want a handy equity calculator, one of our moderators, Alain, has one. You can find it here Feel free to add any additional links to questions or answers that expand on the topic of equity.