Thank you for this breakdown. Just what I needed. I had a terrible experience with my former startup because of this equity issue. Thank God I know better now. Starting out all over again but this time, on a wiser and better note.
John is the real deal. One of my favorite people on the planet, I have been through his Startup Ignition program 4 times over the past 9 years and it has been life changing for me. He knows what he is talking about and has the battle scars to prove it.
If two shared at minimum 20%+ (20/40, 35/25..) each, then it’s still a majority and allows for 15% to be allocated to future hires and up to another 15% allocated for outside funding, all without equity dilution.
50:50 is not always a problem necessarily. I had a successful tech startup with a former co-founder. We had a lot of trust between us and decided to split the stock equally. The main problem was that making it 60/40 would make the other feel more disappointed and not truly owning the startup as a team. Further more I think, even in the case that you do 60 / 40 and you totally disagree on the direction of the company, even if one person can make all the decisions on their own, it wouldnt be liked by the other not being involved in the decision. This will still hurt the atmosphere in the founding team. 50 / 50 worked out for us, maybe it's rare, but it worked
I also didn't do founder vesting btw, we bootstrapped the startup and got acquired without ever getting VC investment. But it sounds like something that's good to get in place from the start
Not the best advice out there. Getting close to an equal split (within reason) ensures longevity for the company. Saying that equal splits causes issues is just bananas. You want your cofounders (tech or non-tech) to care about the business as much as you do. To mitigate the risk of conflict between immovable parties, you can agree on a specific conflict resolution plan beforehand. This ensures that conflict can be resolved without having an insanely imbalanced split.
Sir you have all the great and helpful answers, this is definitely come with experience! This is a TOP A video which deserves a lot of credits, 1B thanks to you guys !
Thanks so much for the content. I feel like I found a portion of the answer I’m looking for. I really just need a clear answer though. I just got offered a position of CMO as a co-founder and I have been offered 5% of the company but I’m not quite sure what I should ask for or expect as a salary.. because it’s a start up I’m trying to figure out how exactly do I get paid actual money.. 😅I’m afraid to ask because I don’t want to seem nervous and get duped for my lack of understanding. this is my first time stepping into a position like this. I’ve only ever done Marketing and Consulting. this is a whole new world to me. I would really appreciate it if anybody had any answers as to what I should ask for as an initial salary or how I should go about acquiring a payment outside of equity because we are in the pre-seed/seed round so the company doesn’t have much money. What should I ask as far as a salary agreement and expect it to scale overtime?
Thank you for all the information! I have a question. If you're 65/35, where does the 15 % come from for the stock option pool? so it's not 65/35 from the 100%, but after the 15% is taken off, so essentially it's 65/35 of 85%, correct?
Each time you raise funding.. there will be dilution in your stake..if ceo and cmo have 65/35.. then if raise another 10% then ceo's and cmo's stake get reduced.
I hope you reply to this... can a Start-up which is raising Seed Funding allow shares in form of equity? Even if they aren't real shares but a valuation which the founders have worked on?
I'm a newbie, can i ask when you vest the founder shares and after a year you collect say your 10%. Do you have to 'exercise' those shares? You have to evaluate your company at some random amount? Or can you just collect them for $0 from some prior founder agreement. Is this where the tax problem and exception he was talking about comes into play? Thanks! I'm from Australia btw if that helps at all!
I am currently joining a start as a COO with a company that’s only been in business for about eight months. the two founders have put their own money into the company so far without any investors.I will be the main face of the company and running the day-to-day operations. There is not currently any revenue coming in, but we do have contracts lined up how much can I expect for equity? Is 5% too low or too high? My starting salary is about 40% less than what I made it with my previous company.
I only wish the one being interviewed was given enough time to stop talking and have the space for thought process before being abruptly interrupted with the interviewer's next need. Just let things flow more. Do not keep interjecting. It's not an efficient way to get the best out of an interview.
