For equity for cofounder, ensure they keep working at it. No im not a hardass, i’ve just seen too many posts of “how do I separate from my co founder that isn’t really working anymore?” And the only answer is buy them out, keep going, or dissolve it. And seen too many like the uber ceo or other big cases. What’s the standard for this?
Yeah I know the standard is find someone who works hard and doesn’t have this problem, but I dont know anyone who would be up to this, and hiring your friends isn’t often good anyway. So finding other cofounders to be a part of it. The average for mid sized startups secondary cofounders have on average 50% of the lead founder, or equal parts. Or like the hired ceo after its bigger average 2-5%.
What’s the standard? Vesting schedule? How do you determine vesting? Normally with hired ceos big its vest based on tiers of revenue growth or something, what about if you dont know really because it’s kinda brand new? Vesting based on what? What the lead founder thinks they’ve done good enough, what the 2/3 of the founders think the third did good enough? Seems like qualitative can run into problems quickly. Start with qualitative and switch to quantitive later? A vesting max, and pay minimum or something, with a separation clause? I want to give assurity that we won’t just fire them and separate after they’ve worked a bit though. Is there a standard name I can look up?
google slicing the pie, thats quite a nice model for thinking about how to spit equity.
at the very beginning, you might not even have discussed equity with the cofounder. but the moment you do, then what you need to consider is an amount, a cliff and a vesting schedule.
figuring out the amount is challenging and subjective, and the area that you’ll likely get into argument.
cliff basically mean the point after which vesting starts, you could set this to a specific point in time or to a specific event, like investment.
the vesting schedule is usually a % over subsequent period, with those periods set to a specific point in time or to a specific event, like investment.
in addition to this, you would also want to include more details on what conditions under which vesting is permitted and related to protect the company, e.g. you might say that its vesting 25%/year for 4 years, on the condition that each year the cofounders targets are met, if they aren’t then the vesting is proportional the the % of the target met.
finally, this is separate from conversation around salary, but salary should take into account the value of equity, in broad strokes, above a basic salary, equity and compensation package are inversely correlated.
That’s good. Thanks. Cliffs on milestones and percentage over time with deliverables targets