Startup founders split equity equally - right?
The data says differently.
Only 41% of 2-founder companies split the initial equity 50/50, according to our study of 7,764 US companies. That drops to 19% of 3-founder companies - and only 9% of 4-founder companies.
So how does this equity pie actually get cut?
For a 2-founder team, the median split is 55% to 45% between founders A and B.
3-founder team: A= 47%, B= 33%, C= 17%
4-founder team: A=40%, B=27%, C=18%, D=10%
5-founder team: A=35%, B=22%, C=17%, D=12%, E=9%
Clear pattern in the data for there to be a "lead" founder in the team (we've called that person Founder A). They typically receive an outsize portion of equity and very often serve as the CEO.
Of course, there is no "right" way to split equity! Many companies split equally and have wonderful outcomes, as do many companies that split in a different fashion.
The important thing is to have an in-depth conversation with all the founders around equity early in the company's life. That's why we built a set of tools to help guide these discussions in our free Founder Studio (link in comments below).
Oh, and make sure everyone has a vesting schedule in case things go awry later on!
Important data nuances to keep in mind: We measured the equity splits in the chart BEFORE any fundraising happened. So this is a view of the initial company pie. We considered any individual with 5% or more of the company to be a cofounder, excluding any institutional participants (things like accelerators or venture studios). US companies only, founded between Jan 1, 2019 and Jan 1, 2022.
Happy founding! S/o to Rex Salisbury for the inspo on this one.
#cartadata #founderequity #startups #cofounders #equitysplit
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