This video is definitely worth watching. It’s a case study of two startups and their decisions about equity splits between founders. Two real-world stories with lots of wisdom to learn from them.
In short, the first story is about a 50/50 handshake (the equal split!) the Zipcar founder Robin made with her co-founder – and how much angst and regret it caused her shortly afterwards. “It was the stupidest handshake to make” recalls Robin.
The second story is about Ockam co-founders and their decision to split unequally. The decision was very logical because, for instance, one co-founder had worked for the other one for seven years as a junior before they decided to start a company. It was clear that their contributions to the startup wouldn’t be the same. And they did a great job of evaluating different scenarios of how much they would be involved with the startup (what if one of the founders wouldn’t quit his full-time job to work for the startup and so on) and identified different equity splits for every scenario.
Here are the key lessons to be learnt from this video:
- if you don’t want equity split issues to ruin your startup deal with them early
- when you deal with them, keep in mind that a 50/50 split is almost never a good solution
- it’s better to find out early whether you are compatible with your co-founder. Equity talks are the best time to do that.
- go through several scenarios of how your startup is likely to evolve. Decide how your equity split will be changing depending on the scenario.
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