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How to Divide Up Founders’ Shares

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Q: How should shares in a startup be divided between 4 co-founders? If we have equal shares, what if one of us puts in a cash injection at a later date?

You’ve got two good, different questions here.

Question #1: How should you divide shares up between 4 co-founders?

Here are the founder equity ratios at a bunch of SaaS and cloud leaders:

OK, now what if in the early days, one founder puts in a cash injection?

  • The simplest thing is to pick a low & fair price for the shares — and issue them more shares. E.g., you could pick at $2m nominal valuation, and if they inject $50k and the others don’t, they’d buy 2.5% more of the company. This is fair.
  • Less common is treating the cash injection as a loan, that you pay back when you can. But if it’s pretty small, this can be simpler. I’ve done both routes myself.

Co-Founder Equity Splits in Top SaaS Companies Often Aren’t 50/50

Published on January 4, 2021

Source: https://www.saastr.com/how-to-divide-up-founders-shares/

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