You grab your two best friends, get all excited, and then start a company together. Equity ownership will be contingent on the company's valuation pre- or post-money. July 12th, 2022. The remaining $36 million is divided according to equity ownership. Here is the formula Buffer uses to calculate equity and the percentage of the company each team member has the option to buy. TLDR Stock Options was built to help employees and advisors understand the high-level potential value of stock options at a company's exit and to more fully learn about the factors that will affect their equity's value over time. One of the most important things you should work for is to handle a co-founder’s departure professionally and respectfully. Simply enter your information into the fields below, and the calculator will do the rest. Automate your equity plan. This works best for a small team with equal capital investments, responsibilities, skills sets and time commitments. For example, a COO could receive a $110,000 base salary, a 20 to 30% bonus for hitting specific milestones, and some equity. It represents a stake in the company's future success and potential financial gains. On day one, founders own 100%. Experiencing the Thai startup ecosystem for almost a decade, HUBBA professionals have put considerable effort into relieving the founder’s pain in building a business. By filing the 83(b) election within 30 days after you receive the. A cliff period means that during that period, no shares are owned by the person. Spargo says the calculator is built to help founders “understand the impact that their salary has on the long term value of their equity” by using a graphical representation to show how paying. Whether it would be 5% each from both their shares or another way, tools like the startup founder equity calculator can be used to make this task a little simpler. Most companies use. This calculator walks you through a variety of events that can affect the division of a startup's equity. Appoint your board of directors. In the Silicon Valley Startup Attorney article, “Founders & Startup 101: I) Forms of Equity”, Chris Barsness outlines the most important terms that founders need to know in the world of startup equity and vesting. How much equity to give a tech cofounder (according to Founders Pie Calculator) Aspect. 20 reviews 2,318 views | Start the discussion! | Bookmark download for free. As a result, the founders’ stake in the company is reduced; they can calculate equity dilution by taking the pre-money valuation and accounting for the equity they sold for the new capital. What is Net Worth? Net worth is a key concept in personal finance and is often used to measure an individual’s financial health. Let’s assume that the venture capitalist puts your company’s current value at $4 million (pre-money valuation) and decides to invest $2 million. Share dilution can change both your financial stake in the company and how. Model Equity Calculator for Founders with Option Pool Expansion 10. Equity should be split equally because all the work is ahead of you. So, if your company is valued at £1M, and you want to raise £200K, you’ll need to offer 20% equity in your business. Option pool: 20 percent, which can be divided up among. Once they hit the four-year mark, they can swoop into 100% of their equity. As a startup founder, keeping your company compliant is essential to protecting the value of your startup equity and reaping the rewards of your hard work. In contrast, when an investor invests for equity, there usually isn’t a payback clause if the startup fails. Define the role you are looking to hire. Whether you've recently received an equity offer or already hold equity in a company, our calculator is here to provide you with a straightforward estimate of what your shares could be worth in different scenarios. The Startup Valuation Calculator is a financial tool used to estimate the value of a startup company based on various factors and financial metrics. Enter your business's name and industry. Preferred stock and common stock (alternatively preferred and common shares) are two classes of equity typically issued by startups as a security representing ownership in a company. Startup financial advisor David Ehrenberg suggests that 5 to 10 percent is a fair equity stake for CEOs who join the company later. Early startup employees take on a lot of risk and deserve more upside in terms of startup equity & options. The company contribution is rarely exactly 50/50 and the equity split should be based on a variety of factors, including those discussed above. But, when a significant layer of value was added to the startup, each founder could receive a different percentage of that new layer, based on his or her. More countries coming soon! EQUITY DILUTION CALCULATOR. Equity dilution and ownership target calculator for free. 1. Look at your historical growth curve to calculate monthly, or better yet, your weekly revenue growth rate. Source: The Founder Institute. Share. Co-founder Equity Split. You input all the terms for your convertible note investors in this ledger. Home Work. Equity Calculator; Equity Tables; Splitting Equity Between Founders; Further Reading; These startup resources are based on the book Hello, Startup: A Programmer's Guide to Building Products, Technologies, and Teams by. Salary replacement. Legal Counsel on Other Equity Choices. But the difference becomes more substantial if the valuation that you are able to raise at begins to rapidly decrease. Fill in the co-founder names at the top. While this isn’t incredibly accurate it can be a good starting point for early-stage valuations. However, Founders also enjoy the benefit of getting paid their own equity relative to their co-Founders, not relative to their actual investment. Allocate money to investors. Assuming that we have a high-tech startup, spinning out of a university with four members of the founding team. Docracy: An open collection of free legal documents. • Startup founders • Co-founders • Entrepreneurs So, you have a great business idea. by. Giving more than that to an investor is too much, which is risky for your business. 99% of you will need), you'll learn how to avoid this unfortunate, yet totally avoidable, situation. 5 million in this case—the pre-money value plus the investment amount. Sweat equity is a non-monetary contribution that the individuals or founders of a company make towards the company. Typically, a founder starts out owning 100% of a company and, every time capital is raised or shares are issued, that ownership stake is reduced. For purposes of investing money into your own company, you can use the same financing vehicle. The 3-person executive team, including a CEO if one was hired, owns 10%, and splits $3. In 2020, the median pre-money valuation seed round was $6 million. The law mandating 409A valuations was. Calculator Founder Equity (Excel)Initially, the owner is generally shared in percentages between the startup's co- founders in most typical cases. The simplest way for founders to launch and run a startup:1. How can startup founders decide between using a Simple Agreement for Future Equity (SAFE or "SAFE note") or a convertible note to raise funds from angel investors and pre-seed / seed VCs?. 50. The best tips, templates, guides, and tools to help startup teams accelerate growth. You should generally aim to reserve 10-15% of your total company equity for an employee stock option pool. 07M max to $1. It allows founders to structure the equity plan to meet their needs and provides incentives to employees that are appropriate for their contribution level. In the beginning, founders are the sole owners of their start-up. Making 83 (b) is a better option in this case. Financial Technology firm for $100K salary and 1. The tax burden of equity compensation can be lessened by early exercise of those options and filing an 83(b) election. Many startups set aside between 10-20% of their shares in order to have the means to incentivize employees. Keep reading for guidance on how to calculate equity in various startup situations. 99% of you will need), you'll learn how to avoid this unfortunate, yet totally avoidable, situation. The founder’s stake of 60% is now worth $12M despite the dilution (i. The simplest and quickest way to calculate startup equity is by having each founder. Carta’s co-founder equity split tool is a dynamic tool that asks questions about the company and each founder—their roles, responsibilities, skill sets, and other factors—to model a recommended founder equity breakdown. Founders: 20 to 30 percent divided among co-founders. You input all the shareholders here. Business loan. If there are five co-founders, each co-founder receives 20% equity in the company. Fill in the co-founder names at the top. 067% is too little or too much? Jump to the last section to learn more. . Equity threshold. Some founders determine equity per employee based on the seniority of the position, while others maintain equal equity among employees regardless of role. Drawbacks of Equal Splits. Suppose a startup is raising $5 million in growth capital in an upcoming funding round. A very close call if we put the cut-off at 50%. 39% of business founders fund startups with personal funds. by Greg Miaskiewicz • 8 min read published April 4, 2021 • updated August 17, 2022. To calculate the churn rate, divide the number of customers you lost last quarter by the. Startup CEO Salary Calculator US Based Companies that have raised under $100M. Pro-tip: consider including language in the founders stock agreement. 4. A company starts out being 100% owned by the founders, meaning they hold 100% equity in the company. The average founder/CEO holds roughly 14 percent equity at the company's IPO, while an outside CEO holds an average of 6 to 8 percent. Assume that we have a high technology start up spinning out of a university with four members of the founding team. Snapchat co-founders Evan Spiegel and Robert Murphy owned a combined 37% of Snapchat before it went public. 5 million shares. The sheets in the cap table. The average size of a founding team depends on the industry. This article delves into liquidity preferences in startups,. Check Out the Pie Slicer! Manage the contributions of your whole team using the online Pie Slicer software. 5. These include who is founding the company, what the company structure is, who. Dilution also reduces a company's earnings per share (EPS), which can negatively impact share prices in the market. Your startup is gaining pace, and you are bringing on an all-star staff and board of advisers to help you build it. 99% of you will need), you'll learn how to avoid this unfortunate, yet totally. But, to stay on the well-trodden path to success, getting your finances and investments in order is essential. A cliff period means that during that period, no shares are owned by the person. For this reason, it’s important to allocate the right amount of equity for your employee option pool. Document repository with a powerful user permission engine. Step 1 - Dividing equity within the organization. In total, there are now 13,000 shares of company stock (on a fully diluted basis)—and just like that, you now own only 77% of your company (10,000/13,000) instead of 100%. The calculus is different if the CEO or COO/President was a Founder: Founder CEOs retained on average 33% ownership in their companies (median = 25%), while Founder COOs/Presidents retained ~14%. The first step is perhaps the most important - you must divide the total amount of equity (100%) into three groups: Founder Group. Here are three methods you can use to calculate founder equity: Method 1: Equal Split. Allocate the different items, tasks, areas in Column A. Tech co-founder equity: Hiring a CTO is the right choice if you can afford tech salary and a fair amount of equity. If two or more founders contributed, rate each founder's contribution on a scale of 1-5; 1 being the lowest contribution and 5 being the highest contribution. The Startup Calculator can help co-founders understand the ultimate financial outcome for. With the FAST agreement, founders and advisors can agree on how to work together, what to accomplish, and the right amount of equity compensation in a short and simple 5-pager. Studies show VCs prefer uneven splits, but startups still often split 50/50. Startup Founders Startup Operations. Co-founders and early employees often expect initial work compensation with startup equity. Our startup equity calculator is designed to help quantify each of a startup’s co-founders’ contributions in order to more accurately split equity in the company so you can prevent disputes between team members and focus on what matters. Bringing decades of experience from startup, scale up, legal, entrepreneurship and fortune 500, we're on a mission to empower founders and their teams, by making global equity simple and fast, so they can go build a better future for all of us. The calculator basically takes you through each event that can affect the division of a company’s equity. In some cases, co-founders and/or employees will agree to work for lower salaries in exchange for. Successful startups need 3-5 investment rounds before exit. However, in many cases, revenue is not an accurate measure of your company’s financial. Down Round Protection. Drawbacks of Equal Splits. Essentially, startup equity describes ownership of a company, typically expressed as a percentage of shares of stock. Only 26% of companies have solo founders. It’s almost never worth it to go to a startup vs faang unless the amount of equity is large, like single digit percentages. This way the investor ensures the best. All the calculations that happen in the background are in this sheet. We multiply 10 by the weight of 7 to get 70 points. Try Now! If you need to check each founder’s equity shares based on your input, you can use our startup equity calculator. You can write from 2 to 5 different co-founders. Another method to calculate startup advisor equity compensation is the Guidelines method also known as the FAST agreement (Founder/Advisor Standard Template). Both single and double-trigger acceleration applies to the acceleration of vesting in case of acquisition. $200,000. Have traction? This next set of calculators helps you determine the. An example timeframe for an equity vesting schedule is four years. Average Startup CEO Salary in 2023. If there are two founders or more, you may divide the founders shares in agreed-upon percentages (50/50, 50/30/20, 50/40/10,. This information is critical in understanding the company’s valuation and potential return on investment. The “business guru” who brings commercial and industry knowledge to. After all, equity is what allows you to attract and retain top talent, as well as provide incentives for employees to stay with your company for the long haul. calculator. One key criteria for startup equity allocation is who had the original idea and developed the business plan (although the execution is arguably more important). In this guide we go through important questions about startup equity for founders, employees and investors, including cap table management, splitting equity with your co-founders, common and preferred share classes, vesting schedules and employee equity compensation. 7M from top-tier VCs and had 6 employees (4 founders & 2 others. Issue equity, raise funds, stay compliant 3. 4. Generally, the lead founder (or founding CEO) receives the largest equity percentage — typically 30%-50% as seen in Figure 2. Here are two additional articles that also provide good guidelines. 00001. This calculator shows how to determine a founder's equity dilution after a single round of fundraising/capital increase. Look, starting a new venture is hard, but having to figure out what is fair for each cofounder shouldn't be. Dividing Equity. The preferred class of stock in a startup is typically subdivided into series, each representing a different round of financing, like Series A, Series B, and so on. Since the SAFE price is higher than the S-A price, the SAFE automatically takes the lower price of the 2. The company contribution is rarely exactly 50/50 and the equity split should be based on a variety of factors, including those discussed above. Completed diploma programme or Bachelor’s, Master’s or Doctor’s degree programme or vocational education/training in Austria. The clock starts ticking as soon as we onboard. One major complicating factor with granting equity in an LLC is that W-2 employees of an LLC cannot hold equity in. However, the price used for SAFE 2 is not $0. Founders need to remember when it comes to valuation, everything is open to negotiation. In 2023, the average startup founder’s salary will be around $148,000 per year. Startups should use an independent, outside valuation firm to get a 409A valuation before offering stock options to employees to avoid fines and legal issues with the IRS. Quiz. Assess the added value of each co-founder. That 12. For instance, consider this simple equity structure without founder vesting: Co-Founder 1 – 40%; Co-Founder 2 – 40%; Investor – 20%; If co-founder 1 decides to leave, he will take 40% of the shares with him. What happens to existing shareholders in an IPO. In this guide, we talk about the fundamentals of startup equity distribution: What is startup equity; Who gets equity in a startup; Factors to consider. Eqvista’s startup valuation calculator is a tool that helps you calculate the valuation of a startup within a matter of minutes. P and anything else that can be used as a deployable asset to help create buzz around your startup’s profile. For tech startups, 10 or 15 million authorized shares is common. This is why equity dilution is sometimes called founder. Your job starts in. Most founders can expect to give away at least 10 percent of their startup during the initial seed round. We compiled the largest ever set of benchmark data, comprising over 20,000 option grants from more than 1,650 startups across the US. All your common, seed, series-a cap tables are in this sheet. For example, a cap table can show the company’s founders and key employees first, followed by venture investors, and then angel or minority investors such as family and friends. A startup business needs to decide how the equity in the business is divided. Currently available for Australia Pacific companies only. Research by SaaStr backs up this suggestion. 1) Time Spent on the Startup. 6577. Under “Prior Round,” select round type and enter the post-money valuation. How much the individual receives depends on what stage the organization is in and the person’s experience level. CFOs, Heads of People and law firms love that Ledgy. Follow these steps to calculate a baseline valuation figure: Calculate your revenue run rate (RRR), which is the most recent month’s sales times 12. Initial Grant. We will be addressing questions startups regularly face –. Advisors are an amazing part of the startup ecosystem. For example, if a worker is worth CAD 10000, and the share price is worth CAD 5, then the sweat equity, she will receive is CAD 50000. A good CTO knows how to manage people and build a team, what strategy to choose for product development, and how to put efficient programming processes in place. As you progress beyond this stage, you will. LLCs can be complicated to diligence as part of venture financing, increasing costs and time to close fundraising deals. Most startups fail. Equity management softwares like Cake exist to simplify this process and provide contract templates that are already reviewed by lawyers. We provide the tools and information you need to build your knowledge and position your startup for success. A resource for entrepreneurs and founders of startups in various stages of growth, WilmerHale Launch is your source for answers to the questions that impact you every day. The calculator allows for up to five investors and two co-founders. It's important for startup founders to know how much equity they are ready to give up. If you need help valuing your company, we offer business valuation consulting services. A. Just keep in mind that this tool cannot be used independently, as the website also admits. But to create an effective option plan you need to know how much to award to each team member. If more capital is raised and after enough equity dilution, the founders’ ownership stakes may be reduced to less than 50%. In this case, the first founder would own 40% of the company, while the second would own 25% (2 million / 10 million x 100% and 1. Equity Calculator. Investment vs equity: Balancing cash and company control. For us, anything that has the word ‘simple’ is already winning! At Cake, it’s all about simple and fast. The inventor who is recognized as the technology leader in his domain. The company had raised $1. Use equity management softwares. The founder equity split should be a considered, not hasty, decision. ; Defining Roles and Additional Factors: Before discussing equity, define each. The formula for calculating startup valuation varies and may involve different methods, such as the. You are welcome to contact her at (650) 326-3412 or at info@stockoptioncounsel. 2013. stock options, for 0. Fill out as many of the questions below as possible. The company contribution is rarely exactly 50/50 and the equity split should be based on a variety of factors, including those discussed above. This can be taken from similar job postings and the market as a whole. Our free startup equity calculator can help you understand the potential financial outcome of your offer. Definition of Sweat Equity. 000 minimum with an equity share of at least 50 %. The cost of capital calculator equates the cost of funds a startup raises to finance its growth. Co-founder equity split - (US) Startup Market Data 45%/55% :. Smart People with Good Intentions. The range is wide. Part 1. Startup Equity Calculator. VC to calculate how your round shapes up and how your dilution. As you progress beyond this stage, you will have less equity to offer. Startup Equity Calculator. Regardless of your capital at launch, 10 million authorized shares is generally the sweet spot for a new startup company and the number of shares that most corporate law firms would recommend to. We have seen that the average granted equity to startup employees is 1% for the earliest members of the team and this number diminishes as the startup grows. We compiled the largest ever set of benchmark data, comprising over 20,000 option grants from more than 1,650 startups across the US. However, startup employees expect to receive other forms of compensation—usually equity in the company—with the hope that these will make up for the lost wages in the long run. Input your individual view of the contribution by each founder on the organization. As a founder, the board of directors at your startup will have a statutory obligation to only offer shares or stock options to employees and advisors at what is known as “fair market value”. In 2023, the average startup founder’s salary will be around $148,000 per year. That’s where the traditional equity plan went wrong! Generally, founders enter into the fixed-equity-split agreements based on the predictions of the equation: Cofounder’s share % = The value of their contribution/The total value invested in the startup. For this example, you divide 400,000 by 80% to get 500,000. Title Cash Comp Cash Median Bonus % Co Equity % Co. Let’s assume that a company has a total of 10 million shares issued, and a founder holds 4 million shares while another holds 2. g. Some benchmark tools are: 1. "You should only work for a startup if you really believe in the mission and team. e cost of a mobile application. Create an employee stock option pool, or ESOP. This calculator is a step-by-step guide that takes into account a number of factors, including the stage of the company, the industry, the amount of money raised, and the pre-money valuation. Founders typically set up a vesting schedule when they set up their companies, even if they are solo co-founders. vedant_ag. Add your. Equity is more logical, with the solo founder holding the highest amount of equity at Pre-Seed and Seed, then balancing out at Series A. However, for founders, there's a trade-off to consider. from the old $1. I have yet to find a startup equity calculator that was not developed by a very intelligent person with the best intentions of helping hapless founders make good choices about equity. Note Genie - understand the impact of convertible and SAFE notes on startup founder equity dilution. 1,572,495 new ESOP shares are made to ensure there is a 10% ESOP post the round. Decide how much of their total compensation you. It’s simpler dividing a multiple of 10 than it is a multiple of 3 or 7 or 8. In exchange for their abilities and services, you would like to give them shares…What is common equity for startup? What is equity in a startup? Essentially, startup equity describes ownership of a company, typically expressed as a percentage of shares of stock. Here is a co-founder equity calculator that can help you through the process. #2. The Co-Founder Equity Split Spreadsheet has 5 different calculators in it, and a final box that averages everything out among all 5. This increases the threshold for the calculations from $107,000 to $124,000, increases the lower Reg CF threshold for investors from $2,200 to $2,500, and increases certain thresholds on the 12-month amounts that issuers can raise (e. When a startup is initially formed, it will usually authorize 10,000,000 shares of common stock. Here’s a TL;DR summary of the most important rules you should stick to when splitting equity amongst co-founders: Rule 1: Aim to split as equally and fairly as possible; Rule 2: Don’t take on more than 2 co-founders; Rule 3: Your co-founders should complement your competencies, not copy them; Rule 4: Use vesting. Investors own 50%, and get $18 million, split between two firms. Therefore you should continue to offer less equity in each subsequent round. 5%. A simple agreement for future equity delays valuation of a company until it has more performance data on which to base a valuation. Liquidation preference is a critical aspect of startup financing that impacts both shareholders and founders. Venture Capital Providers: 30 to 40 percent. Tech co-founder equity: Hiring a CTO is the right choice if you can afford tech salary and a fair amount of equity. In this article, we cover how you can determine which type of investment will meet your startup’s needs and help you gain access to funding. Allocate the different items, tasks, areas in Column A. Now that you understand the cap table dilution formula and how it is calculated, you can calculate the dilution in investment or ESOP. German: intensified elementary use of the language (A2 level)The founders will hold an 80% stake and the investors 20% prior to the creation of the employee option pool. Startup financial advisor David Ehrenberg suggests that 5 to 10 percent is a fair equity stake for CEOs who join the company later. Type any values/percentages into the inputs, and the outputs will update. 5% for the COO, and 32. Let’s take an example to understand this situation:That includes data on startup headcount, payroll and equity metrics, salary medians, and remote work. Startup Equity @ Early Stage Startups "Hey baby,. Experience of raising a round. Initially, founders own 100% their startup’s equity, though they eventually give away the majority of their equity over time to co-founders, investors, and employees. It’s even harder to get customers to find it, try it, and pay for it. Common equity allocation methods among co-founders include equal splits (such as 50-50, or 33-33-33), or a senior controlling partnership, where one founder has a larger stake (such as 60-40). 5% during the Series A round, according to Carta data from Q1 2023. In the world of startup funding, founders are always on the lookout for simple, fast, and creative ways to raise capital. Take advantage of our free startup valuation calculator by answering the following 25 questions, and we’ll calculate an approximate valuation range. , are used in calculating a company's valuation. Last week, Grover had posted on X platform (formerly Twitter) about the. 1. The equity distribution may be 51-49 or 60-40 or 40-30-30. 100% digital, all your shareholders will have the same version. A great tool to evaluate the anticipated contributions of your founding team is the Co-founder Equity Calculator. 2. Equity Capital. Part 1. 15% using this table. Want to know how you can split startup equity with the help of a startup equity calculator?Here, you would get a clear view of what type of data you need to. The Carta founder equity calculator makes it easier to have these. A startup seeks funding from an investor who requests a 20% equity stake. “Fair Market Value” is the notional value of stock on the market at the time of sale. g. Y Combinator famously advocates for equal split, and others provide calculators to split the equity "fairly". And when I launched my first startup, I was 21. SAFE 2 is $0. prove capital for the company to be founded amounting to € 30. This concept is known as dilution, and it's something we'll cover soon in this startup equity guide. The basic formula is simple: if you need to raise $3 million, and investors believes the company is worth $10 million, you will have to give them 30% of. Spreadsheet containing 5 calculators and a box that takes the average of everything among all 5. If you have more than one founder, you can choose how you want to share ownership: 50/50, 60/40, 40/40/20 ,etc. Reset. How to distribute equity in your startup. You can use this sheet to calculate your own values by replacing the numbers in the Absolute Scores table. Check Out the Pie Slicer! Manage the contributions of your whole team using the online Pie Slicer software. Weight. Startup Equity Calculator. As noted above, this model is intended more for educational purposes than for performing serious valuations. Shake: Create, sign and send legally binding agreements in seconds. The Pie Slicer. 5% for CTO. This calculator asks questions about the company and each founder—their roles, responsibilities, skill sets, and other factors—to model a recommended founder equity breakdown. Startup Equity Calculator: Figure out how much equity to grant new hires in seconds. 6775, it is $0. To determine what those may be, and how the value of your equity may grow despite founder dilution, you can use the following dilution calculators: How to Calculate Founder Dilution; Illustrating Founder Dilution; Best. Consisting of 10% – 20% ownership of your company, this pool is typically drawn from founders’ shares. A Section 83(b) election can allow a startup company founder who receives restricted stock to save a substantial amount of taxes because tax is based on the fair market value of the property when it is granted, rather than its fair market value on the date that it vests. Issuing equity: Step by step. WilmerHale is providing direct access to a Co-Founder Equity Calculator, an online tool built and operated by a third party. At the beginning of a startup journey, founders own the full number of the startup's issued shares, with each. Suppose a founder owns 50% of a company valued at $2,000,000 (pre-money valuation) before a new funding round. As CEO, Steve Jobs received 45%, as did Steve Wozniak, the programmer of the. You will make mistakes and when you do, you'll need. 1. Co-Founder Equity Calculator which takes into considerations roles, contributions and risks: Foundr: Co-Founder Equity Calculator. 1. When your startup is in the initial stages, the founder or the co-founders usually own it entirely, typically in a 50/50 split, or 60/40, depending on various conditions. Gust. toolkit. The final results are helpful, but it’s the act of going through the process and asking yourself (and each other) the hard questions that truly pays off. When a startup first begins, the founders usually own their entire company. 6775. It’s hard to bring a new, needed, and differentiated product into the world. 2%, Founder 3 16. A SAFE can be converted into preferred. g. * If your revenue correlates to user growth, then use this figure. Get Started!Common equity allocation methods among co-founders include equal splits (such as 50-50, or 33-33-33), or a senior controlling partnership, where one founder has a larger stake (such as 60-40). We may have only invested $100,000 of our time and capital but wind up with 40% of the entire company. This calculator walks you through a variety of events that can affect the division of a startup's equity. What are startup stock options. Companies use equity compensation to incentivize employees to stay at the company and close the compensation gap between startup salaries and larger companies. Grant #2. If not, you need a system that will split equity fairly according to what each founder contributes.