How to Split Equity Between Founders (With a Worked Example)

Splitting equity is the first real decision a founding team makes, and it is the one most often settled in a single conversation over coffee. The result is a number that will sit on every future cap table, every term sheet and every dilution calculation until the company is sold or closes. This guide covers how founders usually split equity, what to write down, how reverse vesting protects the team, and what a split looks like once outside money arrives.

It also covers a narrower question than most founder-equity guides: how the numbers actually move. We use the same priced-round convention as the Foundily cap table calculator, so the example at the end can be reproduced line by line.

What the market actually does

Equal splits are the most common starting point for two-founder teams. Carta's 2024 analysis of multi-founder companies found that roughly 46% of two-founder teams split equity exactly evenly, and the median two-founder split had moved from 60/40 for 2019 companies to 51/49 by 2024. Equal splits are much rarer as the team grows: the same analysis found around 27% for three-founder teams, so with three or more people, a weighted split is the norm rather than the exception. Source: Carta, founder equity split trends.

Those figures describe what teams did, not what they should do. A 50/50 split between two people who both quit their jobs on day one is defensible. A 50/50 split where one founder has been building the product for a year and the other has just agreed to join is much harder to justify later, when the person who did less begins to feel that the split was unfair.

Five inputs to weigh before you split

The split is a negotiation, but the best outcomes come from naming the inputs first and only then agreeing numbers. Most teams look at five things:

• Idea and prior work: who had the idea, built the first prototype, or did customer research before incorporation. This is usually the most disputed input.
• Time commitment: who is leaving a salary, who is full time from day one, and who is working alongside another job.
• Capital: who is putting money in, and whether that money is a loan, a purchase of shares or a contribution to costs.
• Role and risk: the CEO, CTO or other roles, and the personal financial risk each person is taking on.
• Expected future contribution: the role each founder is likely to play as the company grows, which matters more than past effort once the company is funded.

Give each input a rough weight and check the result against your gut. If the arithmetic says 60/40 but both founders feel 50/50 is fair, the arithmetic has usually missed something. Write down the reasons next to the percentages. A split with written reasons is far easier to revisit at the cliff, when the team has a clearer view of how the work is actually divided.

Why every founder should vest their shares

A split is only as good as the protection behind it. If shares are issued outright with no vesting, a co-founder who leaves after three months keeps the same percentage as the one who stays for ten years. Investors know this, and most will ask for reverse vesting before they invest.

The usual structure is 4 years of vesting with a 1-year cliff, which the vesting schedule guide explains in detail. The main points for a split are these: the cliff protects the company if a founder leaves before a year; the monthly schedule after the cliff means the unearned part is gradually released; and the repurchase right is what makes the schedule enforceable. Vesting is set up before any money is raised, when the cost of agreeing it is low.

The start date matters. If a founder has already done unpaid work, some teams back-date the vesting start to reflect that work, usually by 6 to 12 months at most. That credit has to be agreed and documented, because it effectively pre-vests equity before any outside money was at risk.

A worked example: 50/30/20 before and after a Series A

Take three co-founders who incorporate with 10,000,000 shares of common stock. After weighing their inputs they agree a split of 50/30/20: Founder A takes 5,000,000 shares, Founder B takes 3,000,000 and Founder C takes 2,000,000. No option pool exists yet, and all three shares are subject to 4-year reverse vesting with a 1-year cliff.

A year later the company raises a $2,000,000 Series A at an $8,000,000 pre-money valuation. The investor wants a 10% option pool to be in place after the round, and that pool is created before the new money comes in, which is the convention Foundily's engine uses. The effect is that the existing founders carry the pool, not the new investor. Here is how the numbers move:

Two things stand out. First, the ratio between the founders never changes: 50 to 30 to 20 before the round, and 35 to 21 to 14 after it, which is the same ratio scaled by 70%. Second, the founders' combined stake fell from 100% to 70%, of which 20 points went to the investor and 10 to the pool. The pool is the part that is easy to overlook, and it is why it is worth modelling before a term sheet arrives. The option pool shuffle post walks through the mechanics in more detail.

Reverse vesting in the same example

Now suppose Founder C, holding 2,000,000 shares on the standard 4-year schedule, leaves 14 months after incorporation. Under the schedule the cliff released 25% at month 12, and 1/48 of the grant releases each month after that. At month 14 that is 2,000,000 × 14/48, or 583,333 shares vested, so the company repurchases the remaining 1,416,667 shares at the original price. Founder C keeps 583,333 shares.

The same departure in month 11 would leave Founder C with nothing vested, because the cliff had not yet been reached. That single rule, the 12-month cliff, is why most founders accept it without argument: it protects the team from a departure in the first year, and it limits the damage afterwards to the part that has not yet been earned.

How to model your own split

Start with the share count you want to issue, which is often 10,000,000 for a two- or three-founder company, though any round number works. Assign percentages to each founder, then check the result by re-running the arithmetic. The Foundily cap table calculator takes the same inputs and shows the resulting cap table, including the effect of a pool and a priced round. The dilution calculator is useful for seeing how the founders' stakes fall across several rounds, rather than just one.

Before you finalise, check three things. Does the split match the written reasons? Does every founder have reverse vesting with the same start date, or a documented reason for a different one? And does the model show the founders' stakes after the next round you expect to raise, including the pool? A split that looks fair today can look very different after one priced round.

Put it in writing, and revisit it once

A verbal agreement is not enough. The split, the vesting schedule and the repurchase right belong in a founders' stock purchase agreement, signed by every founder before the shares are issued, ideally with a lawyer reviewing it. The NVCA model documents are a common starting point for the financing side of the same questions, and founders' counsel can adapt the founder terms.

It is also worth revisiting the split once, around the cliff. By then each founder has a clearer view of what the company needs and how much time each person is actually giving. Many teams leave the split untouched; some agree small adjustments, which are far easier to make before outside investors are involved than after.