Equity distribution · Founders

Why is it dangerous to split startup shares 50-50 between the 2 founders?

Maja Rašić QA Tester

January 30th, 2017

Can someone tell me why is it so dangerous to split startup company shares 50%-50% between the 2 founders?

Efuet Andrew Atem

January 31st, 2017

Take it on a case by case basis, the chances are you can still succeed with a 50-50. But just as the common saying goes : "no ship can have 2 captains". Naturally, the person with the larger share say 55% will be seen as the person who has the last word, in the case of a dispute. If you also consider bringing in investors at some point and time, having a 50-50 split sends a bad signal.

Dane Madsen Organizational and Operational Strategy Consultant

January 31st, 2017

It might not be, but the obvious is in the event of a dispute, you will be equally obstructive. As a practical matter, if you have investors or employees you want to incentivize, you will not have an even split for long.

Rob Hirsch Traveler, nature lover, storm chaser, entrepreneur, & epic sleeper

January 31st, 2017

Cofounders dream of being so in sync with one another that they agree 100% on issues, or agree to let the other founder handle an issue no questions asked. It's easier, seems more fair, & avoids awkward conversations.

The reality is founders will not agree on all issues. Cofounders are engaged with a startup for at least 3 years (usually 5-10) and they encounter issues they never dreamed they would, like pivoting the business model.

Would you rather be in a startup that can move forward with a decision (with the potential to either be proved wrong that it was a good decision, or have the opportunity to argue your side if their decision proved wrong), or spend time without progress because the 50/50 split cofounders can't agree on an issue.

Also, if a major decision has to be made and 1 cofounder isn't available, you're stuck again.

I'd also argue that if the cofounders sit down & list what they'll be doing, it doesn't work out to 50/50. For example, what does a non-tech cofounder of a SaaS startup do since they're not building the product? Business, product, marketing, finances, SEO, strategy, HR, sales, design, support, & some testing.