Founder Stock Split in a startup (Full-time vs. Part-time founders)?
A & B have started a company a few months back. Both of them have built the product together and are equally enthusiastic about its success.
However, Mr. A has been involved full time (in the startup), while Mr. B continues to have a day job and is willing to join the startup only when it is fully-funded (i.e. when the startup can pay him a salary).
The Challenge:
For the sake of simplicity, let’s assume that enthusiasm and contribution are a constant. However, given that Mr.A is taking a far greater risk (i.e. joining an unfunded company, not taken a salary, etc), Mr. A should get some sort of a “risk-premium”. Both co-founders agree there should be some kind of a risk premium that Mr. A gets… just don’t know how much.
The Question:
a. The question is how much that should be? In other words, if there were a 100 shares in the company today, in what ratio should A & B split them?
b. Are there any other models where Mr. A can be compensated/respected/rewarded for the additional risk and effort he has put in?
Co-Founder Equity Founders Agreement Fulltime
1 Answer
Stock split is definitely a matter of case by case analysis.
My personal opinion about your case: if the Mr. A and Mr. B have the same effort, impact, enthusiasm and contribution, the ratio - for the sake of meritocracy and transparency - should be 50/50.
The difference is that one needs less time to has the same impact and the same delivers of the other, it happens in all companies, not just in startups. However, from my personal experience, is very difficult to have two co-founders, one full time and other partial time, having the same impact in a startup.
Here are some generic calculators for Funding And Equity on startups :
These tools can provide you a starting point for your own analyses.
