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1. Use http://foundrs.com http://foundrs.com to split equity early on, before your project gets traction. It has vesting built in. And it forces co-founders to

1. Use http://foundrs.com http://foundrs.com to split equity early on, before your project gets traction. It has vesting built in. And it forces co-founders to have that oh-so-feared discussion early. 2. I respectfully disagree with Joel on certain aspects. He is very unclear about how to split equity among a few founders. He seems to advocate 50/50, which I strongly advise against. Fairness is one thing. But my litmus test is: if you quit, would the project die instantly? Then you are the CEO and you should get more. I have advised tens of founders on those issues, including convincing some to fire useless co-founders. It's painful, but usually pretty clear when an outsider (like me) listens to all sides.

klochner 16y ago
regarding (2), wouldn't you more likely be the CTO if the project would die on your leaving? :-P
joeag 16y ago
I think the point is you may not know who is "useless" at the outset and rather than create an argument and dissension at that point, you use vesting. Then when you find out (or all agree) that someone is useless, you can get rid of them (which you are going to have to do anyway) and the amount of equity that they started with is essentially irrelevant since most of it never vested.
mduerksen 16y ago
Your litmus test ist flawed: 1. Nitpick: What if all co-founders meet the criterion (i.e. the project would instantly die if he left)? Are all CEO's then? 2. Instant vs. delayed death: Lets say if A leaves, the project instantly dies - and if B leaves, the company will die the next 6 months if no replacement is found who is just as good. Who is more important? What if the skills of B are the leverage you depend on to become successful and stay competitive? And with 2) you are right in the middle of the discussion you want to avoid: Who is worth how much, who works harder etc., which is just distracting because nobody can tell for sure, and endangering your company because it hurts morale. That's why I agree with Joel to just split equally. And as joeag has pointed out, since it's vested, co-founders that really turn out to be useless won't get a large chunk of the company anyway.
- alain94040 16y ago
  Yes, my litmus test, as I explained it, is simplified. It's a great way to start a conversation on what's really important, but it's not a yes/no question that can be settled in 2 seconds of course. That being said, I prefer that people don't give bad advice online. When you recommend 50/50 split, what is your experience for advising so?
StavrosK 16y ago
How does foundrs get paid? I couldn't find anything on the site, other than a sentence saying "you owe us a percentage of your money".
anamax 16y ago
> But my litmus test is: if you quit, would the project die instantly? Then you are the CEO and you should get more. I know of several technical startups products where the CEO can be replaced. Those companies would die if key technical people left. Since some of them have replaced CEOs already, their CEOs were not essential. Are they doing it wrong? Should they have the tech people take on CEO responsibilities in addition to their tech work? What benefit will they get that compensates for the loss of tech productivity that will result from said shift?

klochner 16y ago

regarding (2), wouldn't you more likely be the CTO if the project would die on your leaving? :-P

joeag 16y ago

I think the point is you may not know who is "useless" at the outset and rather than create an argument and dissension at that point, you use vesting. Then when you find out (or all agree) that someone is useless, you can get rid of them (which you are going to have to do anyway) and the amount of equity that they started with is essentially irrelevant since most of it never vested.

mduerksen 16y ago

Your litmus test ist flawed: 1. Nitpick: What if all co-founders meet the criterion (i.e. the project would instantly die if he left)? Are all CEO's then? 2. Instant vs. delayed death: Lets say if A leaves, the project instantly dies - and if B leaves, the company will die the next 6 months if no replacement is found who is just as good. Who is more important? What if the skills of B are the leverage you depend on to become successful and stay competitive? And with 2) you are right in the middle of the discussion you want to avoid: Who is worth how much, who works harder etc., which is just distracting because nobody can tell for sure, and endangering your company because it hurts morale. That's why I agree with Joel to just split equally. And as joeag has pointed out, since it's vested, co-founders that really turn out to be useless won't get a large chunk of the company anyway.

alain94040 16y ago
Yes, my litmus test, as I explained it, is simplified. It's a great way to start a conversation on what's really important, but it's not a yes/no question that can be settled in 2 seconds of course. That being said, I prefer that people don't give bad advice online. When you recommend 50/50 split, what is your experience for advising so?

StavrosK 16y ago

How does foundrs get paid? I couldn't find anything on the site, other than a sentence saying "you owe us a percentage of your money".

anamax 16y ago

> But my litmus test is: if you quit, would the project die instantly? Then you are the CEO and you should get more. I know of several technical startups products where the CEO can be replaced. Those companies would die if key technical people left. Since some of them have replaced CEOs already, their CEOs were not essential. Are they doing it wrong? Should they have the tech people take on CEO responsibilities in addition to their tech work? What benefit will they get that compensates for the loss of tech productivity that will result from said shift?