How should equity be split in a startup?

[Startup Questions]

This is a question asked by an anonymous member at our most recent event in London.

[Harry]

Splitting equity in a startup involves several key considerations:

• Founders’ Contributions: Base the split on each founder’s input, including the initial idea, financial investment, and time.
• Roles and Responsibilities: Consider ongoing roles, giving more equity to those with greater responsibilities.
• Future Commitment: Allocate more to founders committed long-term.
• Vesting Schedules: Use a vesting schedule (e.g., four years with a one-year cliff) to ensure long-term commitment.
• Early Team: Reserve equity for advisors and early employees to motivate them.
• Market Standards: Research industry norms to ensure fairness.

Discuss these factors openly to reach a fair and motivating equity distribution.