How to split equity in a company

How to split equity in a company? A common mistake among startup founders, especially from CIS countries, is the absence of fixed shares assigned to the founders. Shares are assigned on the basis of gentlemen's or brotherly agreements, which can later play a cruel joke on the founders. That is why we recommend fixing the shares from the very beginning of work on the startup. Why allocate shares? There are two main reasons. The first is long-term motivation, since the larger the share, the greater the engagement. The second is a higher chance of getting investment. The better and more engaged the team, the higher the chances of getting investment at the early stages.

The point is this: if a founder does not value their employees, the minority shareholders, it is a warning sign for a venture investor. How to allocate shares depends on the specific situation. If two or three of you started a startup, put in equal effort and are spending your personal funds, it is better to split the shares roughly equally, while not forgetting to give the leader a slightly larger block of shares to rule out legal risks. A spread of 10% or more is also perfectly normal if a founder has invested more resources or bears greater responsibility than the other co-founders. It also makes sense to apply vesting so that you can be confident in each co-founder. You should always think about an option pool as well: it is a motivational fund for the company's future employees.