When should we split the equity between cofounders?

This is a complex decision with pros and cons.

Splitting earlier has the benefit of helping you attract key players who need equity incentive - because there is no cash and the only compensation is equity.  You can negotiate calmly before you are under pressure to split.

Splitting later has the benefit of learning more about cofounders' commitments and contributions.  It helps you solidify the strategy, know more about the business and therefore make better decisions about how the equity should be divided up.

There is one forcing function that will dictate the timing, which is when you need to file papers for incorporation.  So in a lot of cases teams will end up splitting earlier than later.

Was this article helpful?
0 out of 0 found this helpful

      This website provides general information related to legal and business matters. It is intended for educational purposes only. This website does not and is not intended to provide legal advice. Although we take great care to make sure that all of our information is accurate and useful, if you have a specific issue for which you need actionable advice, please come to the Martin Trust Center in person to speak to one of our Entrepreneurs in Residence or consult a licensed attorney or other professional. No attorney-client, advisor, or other confidential relationship exists or will be formed between you and the Martin Trust Center or the Massachusetts Institute of Technology.
Have more questions? Submit a request


Powered by Zendesk