How to Split Equity among Co-founder

Read this if

• You have a cofounder (or want one) and what to know how to split your equity

Equity Split should maximize motivation

• Equity split is what motivates co-founder in the long run and hardship [1]
• Think about what they want (although they not thinking about their own longterm interest)
• How do we cope equity split thats going to maximize motivation of my teammates?

Primary mechanism of safety

• Vesting = How long we need to work to get that equity stake (usually 4 years) [2]
• Cliff = leave / fire from the company within 1 year, got nothing [2]

More generous with equity not less

• Make them feel like a true owner so we don’t have to motivate them everyday [4]
• Be considerate about your future and motivation of you co-founder (they should be worth a generous equity grant) [3]

Notes

[1] The idea that equity should maximize motivation—not just reflect past effort—is a recurring YC theme. Paul Graham and Sam Altman have both emphasized that startups succeed when cofounders feel true ownership and shared upside.

[2] Vesting and cliffs are standard in startup equity agreements to prevent issues like “free riders” or early departures. The typical YC default is 4-year vesting with a 1-year cliff, which aligns incentives and protects the cap table.

[3] Being generous with equity up front avoids resentment later. In many founder breakups, mismatched expectations on ownership lead to emotional fallout. Generosity signals trust and sets a foundation for long-term collaboration.

[4] Psychological ownership—where a cofounder feels like a true owner—is a stronger motivator than formal titles or salaries. This principle is supported by research in organizational behavior and widely practiced in early-stage startups.

[5] YC often advises founders not to over-index on pre-company contributions (e.g., “I had the idea”) and instead focus on future commitment. The startup journey is long, and equity should reward the next 10 years, not the last 10 weeks.