Data Shows What Cofounder Equity Splits Really Look Like

"Startup cofounders must split equity equally" OR "splitting equally sets the company up for failure".

Lots of strident opinions on this question but what does the data say?

Here are the findings from 9,000+ US founding teams using Carta, all incorporated in the past 2 years:

• 46% of 2-founder teams split equity 50/50 (so a slight majority of teams did not).

• Median split for 2-founders teams was 51% to 49%.

• Very few (less than 5%) of 2-founder teams split 80/20 or higher.

• 3-founder teams only split 33/33/33 about 20% of the time.

• Median 3-founder split: 45% to 33% to 20%.

• Only 1 in 10 4-founder teams split equally (25% each).

𝗣𝗲𝗿𝘀𝗽𝗲𝗰𝘁𝗶𝘃𝗲 / 𝗢𝗽𝗶𝗻𝗶𝗼𝗻

1. Clearly you can split equally or unequally, many teams in both camps. Only problem is splitting a certain way without a deep conversation about it.

2. At the 4 year mark, there wasn't much difference in the "success ratio" between teams that split unequally vs those that split equally. They lost cofounders at a similar rate, they achieved funding rounds at similar rates, etc. Some minor gaps but nothing really stands out.

3. Teams, especially 2-founder teams, are increasingly choosing 50/50 as the default path. Only a third or so of 2-founder teams split equally in 2017 vs 45%+ today.

4. Vesting schedules (4-year minimum) are a critical piece of this — but the changes to the private lifecycle of startups have started conversations about extending these.

5. Will AI startup with lower capital costs and faster growth affect founder equity? Obviously these new builds may be less dilutive (both in funding and in lower employee counts) so founders could have bigger slices of pie over time.

6. The data seems to suggest solo founding is also on the rise over the last few years. No hard conversations needed in those cases!

Happy team building 🙏

{This is a scheduled post - pls forgive any lack of reply to your wonderful comments below, I'm still in Japan on a short break. Back soon.}

#startups #cofounders #founders #equitysplit