Question 1

Should co-founders split equity 50/50?

Accepted Answer

Only about 33% of startups do equal splits according to Carta data. An equal split works when contributions are truly equal, both founders are full-time, and both bring comparable skills and risk. If one founder is part-time, contributed the original IP, or invested personal capital, an unequal split often makes more sense.

Question 2

Should co-founders have vesting schedules?

Accepted Answer

Yes. Even though it feels unnecessary when you are excited about building together, vesting protects both founders. The standard is 4-year vesting with a 1-year cliff. If a co-founder leaves after 6 months, they forfeit their unvested shares. Without vesting, a departed co-founder keeps their full stake while contributing nothing.

Question 3

What happens when a co-founder leaves early?

Accepted Answer

If vesting is in place, the departing co-founder keeps their vested shares and forfeits the unvested portion. Without vesting, they keep everything, which creates a dead equity problem where a significant ownership stake belongs to someone not contributing. This is the primary reason co-founder vesting is essential.

Question 4

How does the Slicing Pie method work?

Accepted Answer

Slicing Pie tracks contributions over time: hours worked (valued at market rate), capital invested, and resources provided. Equity is allocated proportionally to contributions. It works well at the very early stage when contributions are uncertain, but becomes complex to administer once roles stabilize and the company raises outside funding.

Question 5

What is an 83(b) election for co-founders?

Accepted Answer

An 83(b) election lets founders pay tax on their restricted shares at the current (low) fair market value rather than when the shares vest at a potentially much higher value. It must be filed within 30 days of receiving the restricted stock. For early-stage startups where share value is near zero, this can save significant money in future taxes.

Question 6

How does the co-founder split affect future dilution?

Accepted Answer

Both founders are diluted proportionally in future funding rounds. If Founder A has 60% and Founder B has 40%, and a round dilutes everyone by 25%, Founder A ends up with 45% and Founder B with 30%. The relative split stays the same; the absolute percentages shrink equally.

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