Deciding how to fairly divide equity and ownership of a startup is important to both your co-founders and your business’s future. This free tool (based on Gust data) will help you ask the right questions to determine how much value each founder will contribute, and give you a sensible, objective recommendation for a fair equity split.
At Gust, we reviewed hundreds of equity ownership agreements between founders of successful ventures, analyzed various forms of businesses, and studied the frameworks available to allocate ownership. This research helped us develop our own framework for determining a co-founder equity split.
While analyzing these ventures, we found patterns in the types of skills that tend to lead to successful outcomes. Some ventures need founders with deep technological knowledge (think Google) while others require a balanced approach to technology, design, and hustle (think Airbnb). Most ventures require one entrepreneurial co-founder who can commit wholeheartedly to the company, serve as the primary spokesperson, be willing to forego work/life balance, and drive the venture to success. That person will usually act as CEO, but may well require a strong team of co-founders to complete the management team. Accordingly, we believe that you should view equity allocation as a function of:
- The type of venture you are pursuing (a big and difficult question that our tool can help you break down into several simple questions), and
- Which co-founders are bringing what kind of value to the table, what kind of value, and how much.
Based on responses to questions about your business and your co-founders’ backgrounds and contributions, as well as the level of commitment and personal responsibility they are willing to sign up for, we can produce a venture-specific recommendation about the proportional ownership of the company.