Splitting Equity With Co-Founders

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Splitting Equity Wrong Can Sink You
Read time 2.0 minutes.

More startups blow up over co-founder equity than over bad products.
Why? Because too many founders treat the split as a handshake agreement instead of a 10-year contract.

If you don’t set terms properly, the fallout is brutal.

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The Co-Founder Prenup Checklist

1. Vesting Schedule (Non-Negotiable)

   1. Standard is 4 years with a 1-year cliff.

   2. Shares must reverse-vest if someone leaves.

   3. No one should walk away with a big chunk after a few months of effort.

2. Contribution-Based Split (Not “Even”)

   1. Use the following to determine how to split equity:

      1. Time commitment

      2. Capital invested

      3. Fundraising ability

      4. Domain expertise

      5. Product execution

         Then assign percentages accordingly. A founder who built the prototype, raised early money, and went full-time should hold much more than someone who joined later on part-time.

3.  Deadlock Mechanism
   Disagreements stall companies. Decide upfront how to break ties—whether that’s an advisor with a vote, a lightweight board, or an agreed arbitration process.

4.  Roles & Responsibilities in Writing
   Define who owns what: product, hiring, fundraising, GTM. Ambiguity creates resentment.

5. IP & Non-Compete Agreements
   All intellectual property must sit with the company from day one.
   Any gray area around IP will scare investors and complicate fundraising.

I’ve seen early-stage companies lose a year fighting over equity after a co-founder quit.
I’ve seen another where a co-founder with oversized equity but minimal contribution scared off investors.
And I’ve seen promising startups collapse because their founders never documented vesting or IP properly.

Investors always ask: “What happens if one of you leaves tomorrow?”
If you can’t answer confidently, you look inexperienced.

Before you go to investors, you need to make sure you ask yourself the following questions:

• Do we have a vesting schedule in writing?

• Does the split reflect real contributions and risks?

• Do we have a process for handling conflict?

If not, you don’t have a solid partnership—you have a liability. Equity isn’t about friendship. It’s about risk, respect, and reality. Have the tough conversations now. Or you’ll pay for them later.

Onwards and Upwards,

Liam Gill