Now what?

We recommend an equal equity split for co-founders. Many of the problems founders worry about with equal equity split are resolved by having a good vesting schedule. Vesting is the idea that if someone leaves the company before a certain period of time elapses, they forfeit a portion of their shares. If all the company’s value is created in the future, you want to avoid a situation where if one co-founder quits after a month, they still own half the company at year ten.

How does vesting normally work?

Having a vesting schedule is the common best practice around the world. A conventional schedule dictates that a founder must work for four years to get 100 per cent of their shares. If they leave within the first year, they typically get nothing. After twelve months, you hit the ‘cliff’ and ‘vest’ 25 per cent. This means that if you leave the day after your first anniversary, you would keep a quarter of the shares you started with. After that, your shares vest in equal monthly instalments until you reach 100 percent of your shares vested at the end of the fourth year. If you leave after that, you keep everything you started with. This schedule – ‘four years with a one-year cliff’ – is typical, but vesting schedules can vary from startup to startup.

What if you don’t have vesting?

The feeling of ownership founders have around their ideas can create negative emotions around vesting. ‘I poured myself into starting this company – what do you mean I get nothing?’ But the minute they start to think of themselves not as the person that leaves but as the person who stays, it starts to feel like a very good idea. Vesting is one of the most important founder protections you can have when legally establishing a company. It helps to resolve the question about equity split. You might start 50/50, but if someone isn’t pulling their weight, and they leave, their ownership will fall. That way, the value is weighted by who actually does the work over a period of time, rather than trying to decide how much the work you’ve done in the past should translate to the value you get in the future.


If you don’t have vesting and a founder leaves early on, they will keep all their shares. This is tough if you’re the remaining founder: half of the benefit of everything you do in future goes to someone no longer contributing to your company. But it also often makes your company uninvestable. You’ll struggle to find any good early stage investor who’ll invest without you agreeing to vesting, and later stage investors might ask you to re-vest a portion of your shares again. If a large chunk of the company’s equity is held by a former cofounder, there usually isn’t enough equity left to properly incentivise the founders, executives, employees, and investors who’ll need to build the company in the future. In short, vesting is essential.

More resources

Why communication matters for founders.

Your ability to communicate can help or hinder you in every interaction you have. And as a founder, you’re constantly interacting with other people. You must be a good communicator.

How many co-founders should you have?

If you want to start a startup, we recommend finding a co-founder. But then, how many co-founders do you need?

Should you find a co-founder?

Perhaps the first question you have when starting a startup is, should you find a co-founder? After helping thousands of founders start companies, our recommendation is a clear yes.

How to communicate as a founder.

Communication is a critical skill for founders. The best founders are often legendary communicators. Luckily, communication is a skill you can learn.

Should you give your co-founder feedback?

A co-founder relationship is unlike any other relationship you’ll have. Your co-founder is not your friend, your colleague, or your lover. At Entrepreneur First, we have helped thousands of people start companies with complete strangers.

How should you split your company with your co-founder?

When you’re planning to start a company with someone, it’s important you establish the ownership split from the beginning. Dividing the company between co-founders can be a contentious issue.

The Co-Founder Agreement Checklist

You’ve done enough testing to think you want to work with your co-founder long-term. Now what? While specific legal elements of establishing your company will vary from country to country, some core issues remain universally important.

How do you give your co-founder feedback?

Giving feedback is one of the most important things you can do for your co-founder and for your team. But giving bad feedback can damage relationships, even with the best intentions. So, as a founder, it’s your job to get good at giving feedback, fast.