What should be prioritized when dividing equity with co-founders?

Long-term motivation and commitment to the company should be prioritized over negotiation tactics when dividing equity with co-founders.

How can equity safety be ensured for startup teams?

Vesting and a cliff can be used to ensure equity safety for startup teams, with four-year vesting and a one-year cliff.

What should a CEO do to keep the team motivated?

A CEO should keep the team motivated, even if they don't receive any rewards within the first year.

Why is a one-year cliff for vesting important?

A one-year cliff for vesting acts as a hedge to correct any incorrect decisions about choosing co-founders without long-term harm to the company.

What should be the motivation for co-founders?

The motivation for co-founders should be equity stake, not external factors.

Equity Division for Co-Founders: Prioritizing Long-Term Commitment - Michael Seibel

Name: Equity Division for Co-Founders: Prioritizing Long-Term Commitment - Michael Seibel
Uploaded: 2023-03-09 21:09:02
Description: Prioritize co-founders' long-term motivation and commitment over negotiation tactics when dividing equity and to use vesting and a cliff to ensure equity safety for startup teams.

This article is a summary of a YouTube video "How Much Equity to Give Your Cofounder - Michael Seibel" by Y Combinator

TLDR Prioritize co-founders' long-term motivation and commitment over negotiation tactics when dividing equity and to use vesting and a cliff to ensure equity safety for startup teams.

Key insights

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Most founders miss the key point that equity splits with co-founders are what's going to motivate them to stick with the company through the years and years it takes to build a large company with massive impact.
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The primary mechanism of safety when it comes to giving equity is vesting and a cliff, ensuring commitment and alignment of interests.
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Giving equity to cofounders within the first year can maximize team motivation and commitment.
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Giving more equity to your co-founders can create long-term motivation and benefit the company in the long run.
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"I don't want to create a situation where I have to motivate my co-founders. Every day I want their equity stake in this company to be the thing that gets them to wake up in the middle of the night."
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"Your company becomes far more viable because your co-founders are all motivated you know in the past."

Q&A

What should be prioritized when dividing equity with co-founders?

— Long-term motivation and commitment to the company should be prioritized over negotiation tactics when dividing equity with co-founders.
How can equity safety be ensured for startup teams?

— Vesting and a cliff can be used to ensure equity safety for startup teams, with four-year vesting and a one-year cliff.
What should a CEO do to keep the team motivated?

— A CEO should keep the team motivated, even if they don't receive any rewards within the first year.
Why is a one-year cliff for vesting important?

— A one-year cliff for vesting acts as a hedge to correct any incorrect decisions about choosing co-founders without long-term harm to the company.
What should be the motivation for co-founders?

— The motivation for co-founders should be equity stake, not external factors.

Timestamped Summary

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00:00
Prioritize co-founders' long-term motivation and commitment over negotiation tactics when dividing equity.
💰

01:28
Use vesting and a cliff to ensure equity safety for startup teams, with four-year vesting and a one-year cliff.
💼

02:00
Keep your team motivated as a CEO, even without rewards in the first year.
💡

02:06
Give more equity to co-founders to create long-term motivation and use a one-year cliff for vesting to correct any incorrect decisions without harming the company.
💰

02:47
Co-founders should be motivated by equity stake, not external factors.
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02:58
Employees working on weekends and feeling like owners of the company are motivated to work late and recruit friends.
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03:08
Equal equity splits for co-founders can boost a company's success and drive, but there's no one-size-fits-all approach.
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03:25
Consider co-founders' future and motivation before granting equity, and only make those who are worth it co-founders.