Startup Company and Equity for Members


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Thanks for taking the time to read this post. I am looking for some advice on how to setup equity for members of my company, which is a location-based social network for iOS devices. As it stands currently, there are three members - myself, the founder, and 2 software developers.

I am in talks right now with bringing yet another member (designer) on board vs. hiring him as an employee, since funds to pay him are low and he would be shaping the app and fathering it as much as the 2 developers are.

I am unsure of how to 'divide' the company equity up percentage wise fairly between myself and then almost equally between the 2 developers and the 1 designer, while reserving equity that would be available to investors/angels.

From another post I read on here, it looked almost as if 50% was split between members, while the remaining was reserved for investors and a small amount was left unallocated. We are finishing the business plan and the iPhone app is already about half-way complete and now it is time to discuss stakes in the company and I am unsure how to about making the ownership fair for all members involved.

If I were to think of the members making up the "pie" at the moment, ownership might look a little like this:

Chief Executive Officer - 35%
Chief Technology Officer - 25%
Chief Innovations Officer - 20%
Chief Creative Officer - 20%

I guess my main question is, aside from member ownership - what % should we leave unallocated, what % should we allot for investors, etc.

I would love and really appreciate some guidance in this area, and while I do plan on speaking/hiring a business lawyer, it would be great to have a pretty solid idea of how I want to split the company up. If anyone could point me in the right direction, or offer up any advice, I would be in your debt!

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asked May 22 '11 at 02:40
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Canty Jeffrey
10 points

2 Answers


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This is a common question on the site. You might consider looking on the site for other answers to similar questions. Joel's answer to this question may be useful.

answered May 24 '11 at 23:52
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Tim J
8,346 points
  • Wow, Tim. That's an awesome post! Thanks for sharing, it's practically a novel - Going to read through this now - – Canty Jeffrey 9 years ago

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There are a number of questions on the site that can give you a good overview of the basics of distributing equity when starting up (like this one ). There's also a question that specifically deals with equity for designers that you should check out.

As for some of the specifics of your case:

1) Plan to set aside 15% initially as the option pool for early employees

2) Don't worry about setting aside any equity for investors. When it comes time to raise money, you'll just reduce everyone's shares by the same percentage that you sell to the investors (ie: if you sell 25% of the company, someone who had 10% will now own 7.5%).

answered May 22 '11 at 05:18
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Alex Miller
632 points
  • Hey Alex, Thanks so much man! I really appreciate the advice! I will read over the link you gave me later tonight! – Canty Jeffrey 9 years ago

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