How do co-founders actually split equity? | Carta
How do co-founders actually split equity?
Author:
Peter Walker
| Read time: 1 minute |
Published date: October 4, 2021
How co-founders split equity in their company is one of the first major decisions in the life of a startup. Figuring out the right allocation for each co-founder can be a messy, difficult process—but avoiding this tough conversation is a recipe for grievances and recriminations in the future.
Unfortunately, most co-founders go into this crucial discussion with little to no context. What is the split distribution across all startups? Do many co-founders simply stick with an equal division of equity? How does the industry you’re in affect this decision?
The Carta research team investigated the equity allocations from 7,764 companies and 18,228 founders to provide useful benchmarks to early-stage founding teams. All companies in this data set were founded on or after January 1, 2019.
Co-founder equity
How do nascent companies divide equity among founders?
Key highlights
Equal split? Think again. Only 41% of two-founder teams split equity equally—and that percentage falls drastically for three-, four-, and five-founder teams.
Industry plays a major role. Founding teams tend to vary in size depending on the industry they’re in. For instance, nearly 60% of biotech startups have three or more founders.
First among (co)-founders. Across all sizes of founding team, there is typically a “lead” founder who receives an outsize proportion of company equity. Often, this founder becomes the CEO and head decision maker for the business.
The full report shows you exactly how founding teams of your size have split equity recently. Download the report and walk into your upcoming cofounder conversations with confidence.
Author: Peter Walker
Peter Walker runs the Insights team at Carta, focused on discovering key data and narratives across the private capital ecosystem. In a former life, he was a marketing executive for a media analytics startup and led the data visualization team at the Covid Tracking Project.