Stupid Cofounders

If your cofounder(s) have more equity than you, you are stupid.

Wait, but “they bring more to the table than I do”. Bullshit. It doesn’t matter who brings what to the table. Everyone is starting at ground zero. Building a business is hard and takes lots of time, passion, energy. If they said this they’re not right for you.

Wait, but “I joined later”. Bullshit. If there was enough value created before you joined you probably shouldn’t be a cofounder. If not there’s no point in “joined later”. Everyone is starting at ground zero.

Wait, but “I’m taking salary and they’re not”. Bullshit. Then structure it as a loan that will be reimbursed upon financing. If they’re taking more equity for this reason they’re definitely not for you.

Wait, but “One of them is investing his own money”. Bullshit++. If he or she has the money and wants to use it to get the ball rolling then structure it as a loan, not equity, that gets paid off upon external financing. If he or she wants to own more just because he or she has the money he or she is definitely not for you.

If there is no equality, there can never be the same passion, commitment, drive to succeed. You’re all in this together and going to spend a good portion of your life building a dream. If not, you shouldn’t do it.

  • After 5 years in, this is fairly accurate. Our 3 founders, are +/- 5% of each other. The rich guy who was at the top of the food chain in the corporate gig, put a little more money in up front a got a little more. The tech guy came in as the same time as the rich guy, and got more than the business guy who joined 4 months later.

    For all it took to get to be successful, thinking it should be anything other than equal is wrong. However, I think it’s natural to view yourself in some sort of hierarchy when forming (without prior experience in forming a company from scratch), thinking it should be equal down the road is sort of Monday morning quarterbacking.

  • You’re an idiot and unrealistic. And by the way, one of the best ways to guarantee failure is for two people to go 50/50 and imagine they have equal say over everything. That’s why so many marriages end in divorce. With startups already doomed to fail for so many other reasons, your equality proposal is just like giving it a guarantee for failure.

    Truth: somebody always brings more to the table than the other(s). Somebody is always the irreplaceable one.

    If you create a business that relies on continued equality through its life cycle, you are planning for eventual failure.

      • Agree. What if one of you is working full time and the other part time? Should you both be equal? It all depends on the individual circumstances.

            • Definition of a founder is “without him there is no company”. If you think you are irreplaceable and your cofounder is you shouldn’t start a company with him. If you are working full time and he is part time he shouldn’t be a cofounder. If there are questions / doubts on equal say then you shouldn’t get into it. Yes it IS like marriage – there should be implicit trust, understanding on roles, motivation, respect and complimentary skills.

    • Ask ANY seasoned entrepreneur and they’ll tell you somebody needs to be in charge. Even if its 51%. Equity distribution is a thorny topic and must be taken seriously or else there would be major regret and bitterness down the road.

      The surest way to eff up a partnership is to go 50/50.

      • Yes, I was ranting about the 60-40s or 70-30s or even 90-10s I’ve seen lately. 51-49 is almost equal with one person holding the fort which is important.

    • Agree. I’m running a start up and without me their is no start up. If someone comes on board I would have to be crazy to give him/her 50%. That would be robbing myself and setting the plot for conflict and power struggles …and I’m a very fair person.

  • This post is bullshit. I gave my cofounder 50%. I put in all the money and 3x the work. He was a lazy mother fucker. I had to fire him. Fortunately I protected the company with a vesting schedule so when I had to fire him it was relatively painless

    TL;DR; good people aren’t externally motivated.

        • Duh, Nothing wrong with aspiring to make a living while building something you love. People keep drinking the dumb kool aid of “you must be in it only for passion, not money”, spouted by VCs farting in their mansions, fat bank accts, and kids in private school. Like, how sheep can you be, bro?

          • The ones that are in it for the money usually crash and burn before the ones that have passion for their product —-is my point.

  • You need to run your own company without anyone else if you think and feel that way. When you’re on your own, you will find out very quickly how much value you add on your own. In a perfect world, it would be 50-50, but there is always a co-founder that goes above and beyond what the others won’t do. There is always one who will sacrifice everything to make the company work… then, there’s people like you who focus so much on the pay out that they miss the opportunity to earn more equity, that they miss out on the opportunity to learn and be better.

    Investors and your work is paid through your work, not your equity split.

    If you want to know what fair compensation looks like, start with 50-50 then Ask yourself:

    1) Who had the original idea?

    2) Who puts in the most money? Truthfully, it’s not a loan until you actually make revenue or get investment. Think about it… that money is gone if nothing happens.

    3) Who is truly invaluable? If this person leaves, will the company cease to exist.

    4) Who is building the network and making the sales calls?

    5) Who pitches investors?

    Add 10 points for each answer in favor of the party that does it. You’ll find out quickly even if you both do the job, someone will always do more than the other and if you are both doing all 4 of those things, you’re doomed to fail. It sounds like too many chiefs and not enough indians.

    Immature co-founders start off thinking they are entitled to the whole pie or equal pie because they are so greedy and distrusting, but it comes down to the work you are going to put in. If you feel your cofounders aren’t pulling their weight, do them a favor and yourself – walk away before all the wheels fall off.

    • OK lets start with 50-50 and look at your questions:

      1. Ideas are dime a dozen and their market value is $0. Rarely does the initial hypothesis actually work.

      That risk applies to external money as well not just yours. Problem is when you take equity for that money you’re setting yourself up for failure because people lose motivation.
      Every founder is equally valuable. If not they shouldn’t be founders. Risk of leaving apples to everyone that’s why vesting schedule is there.
      Building a network and making sales calls doesn’t mean success and doesn’t make you any more valuable. Like anyone else you go through a discovery phase and then growth phase. You will only succeed if you find a pain point, solve it, and get people to pay. All founders must work equally hard for that to happen.
      Pitching to an investor doesn’t make you any more valuable than others. If your cofounders are not helping with the pitches you have a problem. Most good investors don’t like unequal splits.

      Bottom line: Still 50-50.

      • You can go 50-50 if you think it’s right. Every success has different faces. But even though it sounds idealistic, it’s really hard in real life and that’s why people are saying you shouldn’t go that way. I tried it myself and also failed to manage it along the way and I’ll never equally split again.

        • I have 2 companies. The one with the 50-50 split has a core team of people I trust to get their jobs done.

          The second company is 90-10 and that one makes me money.

          It’s not about the equity, it’s about the work.

  • The one point you never covered is time spent. You talked about money, original idea e.g. But not on time spent working. Why have you not brought that up? Usually that’s the point that starts any disagreement one person not pulling their weight and others picking up the slack.

    • Interesting point. That “time spent” during founding stage is a bit weird. If you’re joining before the company finds product-market-fit then that “time spent” by other founders is largely moot because all of you will be scrambling to find product-market-fit. If you joined after the company found product-market-fit then you probably shouldn’t be a cofounder but an early employee.

  • “If your cofounder(s) have more equity than you, you are stupid.”

    No foo, you’re the stupid one for making a blanket statement on an issue which very much depends on the circumstances.

    “It doesn’t matter who brings what to the table. Everyone is starting at ground zero.”

    See above. Eg a part time team member who joins 1-2 years after the company’s established was & is not at ground zero.

    “If there was enough value created before you joined you probably shouldn’t be a cofounder.”

    “Cofounder” shmofounder; all semantics and ego. Plain and simple: if you were not present when the company was started, then you’re not a cofounder. You are an early employee/management/team member, and nothing wrong with that.

    Issue on salary vs more equity is quite simple: Regardless of whether we structure it as a loan or not, if you want more equity, then take the risk and forego the salary. Otherwise, any money spent directly on business should be structured as loan without increasing anyone’s equity.

    “If there is no equality, there can never be the same passion”

    Negative. I’d be happy with a minor stake on a rocket ship, especially when I’m taking less risk (eg salary, joined later, etc) while still getting the full experience. And even if on ground floor, true maturity is knowing when you can step up to the leader plate or when someone else is better suited to it and if so, then being an equally supportive partner/colleague. Each ship needs a clearly defined leader.

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