“So how did you split the equity?’
“Easy, equally. Everyone gets the same.”
I’ve heard this so often that, I thought it was time to explain why this is not a good answer.
Let’s look at it from an Investor’s point of view.
What do investors want?
A Visionary. This is the key person. They will hang in longer than everyone else when the going gets tough. They are charismatic and draw in customers.
Commensurate Rewards. Investors want to see individuals rewarded for what the bring and continue to contribute to the company. Typically the Visionary is the person who is likely to hold the greatest proportion of equity.
A departure plan. At some point in the next ten years, someone will leave the founding team. What’s the plan to accommodate this?
Finally, good negotiators. What evidence is there that the founding team are good at negotiating complex agreements?
In fact, it all boils down to one thing. Investors want to see
Evidence of your ability to negotiate.
Failure to decide on a visionary, commensurate rewards and a departure plan are signs of either an inability of the team to negotiate or naiveté. Neither option is good.
Do you still want to split your equity equally?