How To Distribute Startup Equity (The Smart Way) 

Founders: 60%, Employees:10% (2% each year), Advisors: 5% (Normal: 0.1 - 1% equity to 2% Generous). Investors: 25%

By far the best start-up equity video online. The simplicity of this tutorial is absolutely priceless. THANK YOU!!!

Best video I've seen about this topic. Short and to the point. Thank you, Dan!

Thank you so much..you just answered the questions bothering me...thumbs up!

This was exactly what I was looking for. Thanks, Dan for this video. Very helpful.

Great summary and guidelines! Thanks.

What type of corporation should I set up the company as? S-Corp? C-corp? something else?

Hello Dan, Precise to-the-point video. Impressed you openly saying I've been building businesses for 15 years but raised VC two companies ago. I've been building since last 6 years, so glad to hear your success story.

Everyone on here should give you 1% of their company you replied to everyone comments.You are amazing

Thanks Dan! This is the very best on Start-up Equity i've seen so far. Very brief, concise and straight to the point. Keep up the good work

First of all. That shirt looks great on you!. Thank you for explaining in a simple and straight up way

Outstanding video, Dan! Thank you so much! Just what I need! In my case, I have 2 consultants who are acting as advisors but also as the door-openers in the market I am (B2B). They have the best network I could get. Should I remunerate them? Should I give equity, or should I give them a percentage of the sales (and how much would be the common practice)?

Just exactly what I needed!!!!

This was Gold! Thanks for sharing!

Thank you so much for this video. I was actually thinking about how to distribute start up equity for my start up which is still at the infantry stage and this video just came right through to assist.

Wow... this was such a valuable video. Thank you Dan.

I'm 81 going on 19 :) been a public company Silicon Valley CEO still working full time because I love it and Dan is the Man here, no WTF time waste - you put the head, heart, and legs together here in 4:18 xox

Thank you for such a wonderful and succinct explanation. Have a great day sir!

AMAZING! Thank you. The BEST advice.

Great video Dan, explained perfectly, in fact, this has made my decision to vest more in Advisors who can help that 1st year for accelerated growth

Thanks Dan This is exactly that I was looking for and this video has really really hit the nail on the head, I am sure there might be little digging to be done, but one knows where to dig now

This is exactly what I’ve been looking for, for the past month thanks. Do you have any videos on dual class share structure and how this relates to equity and investors. I mean like in the dual class structure, is it that equity is divided into two categories class A and class B? And if so can class A shares be kept for only founders and Team and class B for investors? I am aware that investors would want to have some form of security from class A voting rights, but are there cases where investors are willing to take class B with it’s lesser voting power.

Great video! Helped a lot. Thank yiu

Thanks so much for this video!! Super helpful? I’m thinking about my initial team here... will be 3-4 people. should I bump up past 10% if I am not offering any kind of salary at first? Is 2-3% per person reasonable if there is no other money offered in the beginning? Thanks!

amazing video. love that there are no images, animation etc.. just u talking straight n giving broad estimates. short too.. phew!

Thank you Dan.

Hello Dan ! Thank you for making this video and helping many others navigating on our startup journey. I like to understand how are investors paid- In shares or in cash? Will they only be taxed if they sell their shares and only for the cash distributed ? What is normally the best way to pay investors? Thanks in advance !

Thank you, very valuable !

Hey Dan Great video!! This has helped me a lot Thanks. I have a quick question: How would I go about getting a price evaluation for my start up that’s in infancy stage?

Thank you very much Dan!!! I'm a startupper looking for investors, so your video was G R E A T for me :-). THANK AGAIN!!!

Thank you so much! Really practical advice. Are you an adviser yourself?!

Super useful! Thanks!

Thank you so much for this valuable video, I have an elementary question about it. Should the founders issue the max allowed stocks from the authorized shares, which is 80% for their ownership and then sell from their own shares to the investors ? Or they should own for example 60% only and issue stocks for investors from the untouched authorized shares when raising funds?

Hey. We are three cofounders currently. Started biz 4 years ago. Setup small factory. Current shares division is 40% 35% 25% between us. We have put $70,000 from our pocket by now. Now we have a new cofounder joining us for scaling, networking and bringing in investors. How should we divide equity when we are wanting to offer him a share, and what amount of money should we expect him to invest from his own pocket? (capping of 20%) (he runs low on personal pocket)

Hey Dan! 1 question: 2 co-founders in a startup at 50% each ; investor comes in at X% Equity split is simple and understandable. But when the startup raises further round of investment, the equity is split among all the stakeholders of the company, right? (i.e., the 2 co-founders + investor?) or the earlier investor's investment % remains in tact and only the co-founder's equity gets split further? Thanks!

Thanks Dan, for such a precise and crisp video. How equity is split when we go for 2nd round of funding? Say 1st round I raised $1M, so Co-founders will get $6L. In the second round, if I get say $50M, then how we split equity? Is it only founders equity is diluted? or all others like team, advisor and seed level investors equity is also diluted?

Dan, I really liked the video. I must say. I got a question. If new investor comes in , should I issue new shares or should I transfer the shares? Say , no. of shares in my company is 10000000 and If an investor bought 10% of my company. how much shares should I allocate to him?

I'm a big Shark Tank fan, and I've heard them talk about "advisory shares" a few times. "I'll offer you $250,000 for 7.5% plus 2.5% in advisory shares." What is an advisory share? Is it just their creative way of saying "I'm taking 10%" or what?

Could you create a video explaining the process of actually issuing the shares. Are they issued as a pdf or on paper could you explain the technical part of issuing shares

Hi Dan, just your opinion, I want to offer a Sales Manager a lower Salary at the beginning with Decent cash payment at the end of the first year if we hit our targets, Alternatively the Sales manager can have Stock option instead of cash. But because those figures are so crucial for all things, most importantly the Angel investor, and being able to ease us into the series one for our 2nd batch of investment - I'm now thinking I should give both, but that seems mighty generous, just checking if this is overly generous or the norm, any advice would be helpful

So what should the final distribution look like after all rounds have been funded? Will those employees still have one to 2% and the advisor still have half a percent? Is it only the founders pretty much who get diluted? What share should I as the number one owner still have? I have one other founder but I am primary

So far, looked for hundreds of videos, that one is no-fluff simply explained video. THE BEST. Thanks. :)

Super great advice

Excellent video, I wonder if its a website and app that solves problem of people how to protect that idea from people we share, if they do not sign or asked NDA?

How often do the equity holders get paid through equity? Everytime the main owner does a draw out? Or only when and if they sell their own equity??

I help people/companies go public step by step, I realized some people have super great objectives but don't know where to start after their concept is complete and ready to get listed. A well organized pitch deck is extremely important and part of the company's first impression, I can't emphasize this enough. It's always fun to witness the beginning of disruptive startup greatness.

Great video. But look. When you raising funds you are not usually giving a shares to the investors. The company issues new shares. Each round dilutes others. Is it ok when advisors’ shares got diluted from... let’s say 2% to 0.2% ?

I'm subscribing, great video

He gets to the point at 1:14. You're welcome!

Hi Dan. Great video. A business adds new owners over a ten year span. The business changed value over that time. We need to figure out how to measure equity and share value ten years in. Who owns what percentage of the business? Is it share, stocks or equity we are measuring? Here is what I have and need advise on. Person 1 started the business in 2012 and invested $25k. In 2018 he self evaluated the business at $144k, he added a new minority owner to the business for more capital and help. They bought in at $10k. A year later, he self evaluated the business at $200k, then added three more owners at in for about $8k each. We are struggling to figure out ownership. Some owners put in way more time and resources than others. How do set this up in an equitable way to keep everyone's stake fair?

The dilution after seed rounds applies to founders only and not all the other buckets?

Thanks for the video. So for example, If I have a startup project (a factory) cost of $90M and an investor will provide $20M and the balance is debt from the bank, how much equity is the best to offer in your opinion? thanks

HI DAN..THANKS SO MUCH. I showed some friends my business plans and they want to invest in my small upcoming business. How can i determine what share to give them?

Hi Dan, I need your help to understand equity distribution for Series E Co.

Thank you

I find it better to set up deadline cliffs as apposed to 1 year cliffs.

Hi Dan, very well explained, thanks! If I am the main thinker on the concept of the startup and I need my co-founder who will be my technical lead too, will that be unfair if I keep 5 to 10% more equity than my co-founder? It is because, I have developed the concept and I am pulling him in by explaining what the business will do. Do you have any advise please? Thanks again for your help.

Thank you.

great!

Hi, I like the way you made it simple but I really wanna know, are there any useful books in the market regarding this kinda topics? if yes, can you please suggest some? Thank you

What about the equity supposed to be given back to to the company so the company makes profits?

the best startup video thanks

thank you bro,

Hi Dan Martell, i am working on my startup, team consist of 3 people and we are ready with our beta version of the product. Right now we thought of incorporating the company, since all the 2 people work as a part time on the product. how much equity should i need to give them. or should i need to ask them to deposit some money give the equity. or should i incorporate company once i get the little customer traction, revenue in the company and my friend is ready put some money in the company. i am confused i dono what to do now... Please help me.

Thank You

great message

Hello, your video was exactlt what i was looking for, wondering... i have a construction material production idea. In our market (i mean whole country wide) there is any other producer, every same products are imported from two neighbour countries. And yet the market estimate is 38mln USD. I already did all the research and feasability study an much more. Anyway next week i am going to pitch to my two target investors. One is my brother in law, other is my current boss? How should i do my pitch?

thank you. My name is Mark. I found your content recently and it has been helpful. Would you be against pointing me towards How to actually write up the equity share deal with my investors? The legal papers. I am on a tight budget so I do not want to pay for lawyers. Is am in the fortunate position of my first investors wanting me to present the papers to them, rather than the other way around. thank you for your great content and your time. Mark

hey Dan, i have this business , am writing a proposal for them so how i bring just an idea and make them invest in my idea

I had started a company alone some time back. I met this friend of mine from the college I attended. He really liked the idea and we both see the idea booming in near future. He has asked me to divide equal equity. What should I do? Is it really okay to share my 50% equity for the idea which I thought of? I am very much sure about his skill set and zeal but the thought of sharing a big 50 is daunting me. What should I do? Please advice.

it can be possible in one person company

Love your videos i've Im a tech start-up..I've bootstrapped my venture and now kinda short what should i do?

Thanks for reply. How much % Of equity we keep in free pool for upcoming investors in future. While we distribute quity among founders , small investors as well advisors

Is it possible to have all 60% once your cofounder leaves the company? Also, it is possible to rearrange equities after paying off to investors?

Thank you 🙏

Nice video! +1

Hi Mr Dan good day. Please answer this.There is a company that I am building, so one of my customers approached me couple of days ago and says he wants to come in into the business with some money as a part owner of the company. If at all I'm accepting his offer,what is the best percentage of equity that should be given to him?

sir i has basic dought , suppose i developed app ,i has no money to launch it so, i has to took all 100 % money from investor , then what will be my profite , i just not understanding what mean by equity , pls ans sir

can you make a video on dilution thanks

What if you start a company that is to open franchises of an already established franchise? One person is putting up the cash and the other(s) are going to do the pre work and then operate the franchise(s) how best to determine percentages of ownership?

thank you.

Could you demonstrate in detail how you evaluate how much your worth is when raising capital before you sell a product?

In the camera view your off to the left which led me to believe that you were going to have some sort of infographics to the right while you were speaking even something as simple as showing the percentage that you're talking about why you say it would have been helpful. Aside from that great video and thanks for the information

Hi Dan, I have a few questions. When looking at the termination and buy-back provisions in an equity agreement, how does one structure those provisions to protect oneself from termination for cause ? How do you know if the buyback provision is fair, should be removed, or should be increased?

What will be accounting entry Share capital of company 100000 but money not deposited in company account. Will it be same entry like normal entry Cash/Bank To Share capital Note: Cash ( Capital Amount) not received in Business.

Great video thanks! I'm in a predicament here: Partner A has built audience of 23,000 followers over 5 years, and is starting a staffing agency. Will be busy with company #1 around 50-60 hours a week. Investing initial capital to startup (paying partner B salary of 50K, and buying website/CRM software). Partner B will be developing business from scratch using that audience, his B2B sales experience (good track record), and putting in 70 hours a week. Already has been for months on company #1. Will be responsible for learning industry, making sales process, and day to day operations of getting revenue. Question is: What % of company should each partner get here? Partner A will be very busy, but investing capital and giving his audience info for leverage. B will be doing lots of work here to develop it.

what if 2 partners are in an Asian under developed country: one to manage coders, another to market platform (SaaS) and founder in US resident what should be split if founder is investor too for coders and all startup cost and risking their asset in US?

I need help, I have my software developed and team. I'm finishing up my pitch deck to add to our fundraiser campaign. Is there any way to book a 15-30 minute meeting with you? Thanks Dan

If the total funding of the project is 1 million and if we are giving 15% to the investors. does it means that they are paying amount of 150000 ? then there is also time and dedication of the board member and the investors just paying the money which we are also paying same amount of money. so they must pay more than 150000 to get 15% of the project share right?. I mean for the project evaluation only the finincial part calculated or the time and dedication is also calculated?

I've worked on a startup for three years. Mostly pre-revenue, pipeline of decent contract opportunities, new patentable technology invented (now on third generation). I'm an inventor/engineer. A much more senior person is interested in being CEO and help raise via original connections. His competence is nicely complementary to mine. Wants 1/3 pre-seed. What's your advice on this?

Thank you very much for the video. Please is it possible to get funding from someone for my company(start-up) without offering him/her shares ? Is there a way I could make arrangement with such person without him/her been in my shareholders list?

How do you share equity for a Sole proprietorship business

How should the equity negotiations go about if the company has just been incorporated, not started operations and not making any revenue? In other words, a non-operating company 'X' having 2 co-founders gets an investor that gonna put in the whole amount to start the operations, how should the directors of the company 'X' negotiate the equity divisions with the investor in a manner that is most beneficial for them in the long term?

I was looking for this explanation video for past 2 hours. why no one talks about this

On the second, third or so on investment rounds, do the primary equity holders give up a protion from their equity to the investors?

Hi, can you explain. 1. what if the another co-founder leaves, should he sell his shares? 2. about the team, could you elaborate monthly vests up to four years. meaning?

What does 1st Round of Funding mean? I’m starting my business with my savings and people who I hire on a contact basis keep asking to not pay me, but to invest in what I’m building. There are no partners or employees yet. How do I create shares for random people who just believe in me?

HI DAN, great video! My product is in development and has not launched yet. There are only 2 members in team, me and programmer. Need funding 300K for basic needs and product development so i offered a VC 40% as equity share. Is that too much? I forgot to discuss about option pool for the team, can i count the option pool from my equity and investor's when i already have the team later? Lets say 10% option pool is taken from my 60% and 40% from investor. Need your advice! Thanks in advance

Hi Dan, amazingly simple explanation. Its very helpful. I have been offered a Partnership in existing business due to my industry expertise and network. I may get a fixed salary for existing business and profit share in the new business firm will generate. There are other new Partners also joining on the same terms. I fear that only one of existing Partner and me is likely to bring in new business, other new Partners may just execute the work. Whether its a good idea to negotiate the profit sharing ratio based on the revenue each Partner brings in for 70% of profits? And balance 30% profit to be distributed equally as kind of variable salary for all partners?

How does it work for the 2d year? What are the principles of dilution?