Founder Equity Splits and Vesting Explained

Split for Future Work, Not Past Ideas

The idea is worth very little; the five years of execution are worth almost everything. Splits that reward whoever thought of it — 80/20, 90/10 — tend to demotivate exactly the people you need most, and often get renegotiated bitterly a year in.

A useful test: imagine the company three years from now, doing well. Does each person's share still feel fair given the work they'll have done? If not, fix the split now while it costs nothing but a conversation.

What Actually Justifies a Difference

Legitimate reasons for an unequal split: one founder starts months or years earlier, one is full-time while another keeps a job, one puts in significant cash, one takes a market salary while the other takes nothing, or one brings assets that materially de-risk the business — existing revenue, a patent, a customer base.

Weak reasons: having the idea, being older, being the one who recruited the others, or being "the CEO". If you need a structured approach, score each founder on contribution to date, future commitment, opportunity cost, risk taken and hard-to-replace expertise — then sanity-check the result against the fairness test above.

How Vesting Works

Vesting means you earn your shares over time. The market standard is four years with a one-year cliff: nothing vests for twelve months, then 25% vests, then monthly thereafter. Leave after six months and you keep nothing; leave after two years and you keep half.

Two terms to know. Acceleration on a sale ("single trigger") or on a sale plus dismissal ("double trigger") protects founders in an acquisition — double trigger is the norm. And reverse vesting is how existing shares are put on a schedule, with the company able to buy back unvested shares if you leave. Investors will require vesting; agreeing it before you need to is a sign of a serious team.

Worked Examples

**Two full-time founders, joined together, comparable contribution** — 50/50, four-year vesting with a one-year cliff for both.

**Founder A built and launched over a year, Founder B joins full-time at launch** — something like 65/35 or 70/30, with B's vesting starting on joining and A's credited partly for time already served.

**Three founders: two full-time, one part-time advisor-style contributor** — 45/45/10, with the part-time founder's stake on a longer schedule or milestone-based, and an explicit trigger to increase it if they go full-time.

In every case, write down what happens if someone's commitment changes. The most common cap-table disaster is a part-time founder with a large unvested-but-unaddressed stake who quietly stops contributing.

Option Pools, Dilution and the Cap Table

Set aside an option pool for early employees, commonly 5-15% at the seed stage. Options are how you compete with salaries you can't pay, and creating them dilutes existing shareholders — including you.

Dilution isn't inherently bad: owning 60% of a company worth £10m beats owning 100% of one worth £200k. What matters is what each round buys. Track it in a simple cap table showing every holder, class, number of shares and vesting terms, and model your stake after the next two rounds and the option pool before you agree a valuation. Founders are most often surprised by post-money valuation caps on convertibles and by pool top-ups demanded at a round — ask specifically about both.

Mistakes That Are Expensive to Undo

Five to avoid: no vesting (the big one), handshake splits with nothing in writing, giving advisors or agencies percentage points instead of small option grants, letting a departed founder keep a large stake, and issuing shares to people who haven't assigned their IP to the company.

Each of these is fixable in month one and painful in year three. Put the agreement in writing, keep the cap table current, and revisit the conversation whenever anyone's commitment materially changes.