Founder Equity Split Agreement Template

Have the equity conversation early. Sam Altman's Startup Playbook, which distills Y Combinator's advice, warns that the conversation about the equity split does not get easier with time¹. Don't open with a percentage, though: a bare number shows no reasoning, so a co-founder can only accept or reject it.

Instead, list the factors that matter to your team, then score each founder on each one together, from 0 to 10, with evidence beside every score.

Phrase each factor as a property of a role, a contribution or a month, never of a person. "Commitment" reads as a verdict on character and ends the conversation. Note any factor you drop, and why.

Next, decide how much each factor counts, without letting anyone's first number anchor the rest.

1. 1

   Weigh alone

   Each founder splits 100 points across the factors before seeing anyone else's.

2. 2

   Reveal together

   Put every weighting side by side, with names. Don't average them into a number nobody proposed.

3. 3

   Run every weighting

   Multiply each founder's scores by the weights and add them up. Their share is their total divided by everyone's.

4. 4

   Read the range

   Note each founder's lowest and highest share. A narrow range means you're nearly done.

5. 5

   Price an equal split

   Count the shares an equal split would move, so choosing it is a decision, not a default.

Altman's playbook says nearly equal is best¹. In a 2011 study, researchers Thomas Hellmann and Noam Wasserman looked at 1,476 founders in 511 startups, about a third of which split equally. They found equal splitting was associated with lower pre-money valuations in the first financing round², more so in teams that settled their split quickly. Equal can be right when you reach it after comparing contributions.

In 2006, Paul Graham wrote that about 20% of the startups Y Combinator had funded had a founder leave³, often enough that YC began advising founders to vest.

Founder vesting doesn't hand out shares over time. Each founder buys all their shares up front, and the company can buy back the unvested ones at the price paid if the founder leaves. Writing about employee equity, the venture capitalist Fred Wilson notes that most vesting schedules come with a one-year cliff⁴, meaning nothing vests until the first anniversary.

In the US, a section 83(b) election lets a founder be taxed on the shares' value, minus the price paid, in the year they're bought rather than as they vest. The tax code requires the election within 30 days after the shares are transferred⁵.

Write down each way a founder could leave while you all still get along.

Vested shares stay put in four of these five cases, so the definition of cause matters most. List what counts, such as fraud, a felony conviction or a material breach left unfixed after written notice, rather than describing it.

For a sale, single-trigger acceleration vests shares at closing. Double-trigger also needs a second event, such as the founder being let go or demoted. Fred Wilson advises companies to avoid full acceleration on a change of control and use a double trigger⁴.

Your split settles ownership, not day-to-day decisions. Give each founder an area they decide alone, with a spending limit. Add a middle tier where one founder decides after hearing the others. Keep the list that needs everyone short: raising money, issuing shares, removing a founder, selling the company.

That list needs a deadlock rule, and "we'll discuss it in good faith" isn't one. Name a mechanism, such as an outside adviser you all choose now, or the CEO deciding with the disagreement minuted. With two founders, Altman suggests giving one of them an extra share to prevent deadlocks¹.

In Delaware, a corporation's business is managed by or under the direction of its board of directors⁶, unless the corporate code or the charter says otherwise. If a founder wants a veto over company decisions, ask your lawyer which document can grant it.

One founder agreement should hold all of it, including how you reached the split. Each founder should also assign to the company whatever they built for it before incorporating. If you formed an LLC, these terms belong in your LLC operating agreement.

Ask where the buyback right will live. Delaware treats an obligation to sell shares back to the company as a transfer restriction. Unless it is noted conspicuously on the stock certificate, or in the notice for uncertificated shares⁷, it binds only people who actually know about it.

Once shares are issued, record each grant in a startup cap table, and draft the SAFEs and offer letters that follow with the founder document studio. With the template on this page, River can run your own scores through every weighting.