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When founders divide a startup's equity amongst themselves, are those numbers set in stone (ignoring future dilution)? I ask this because my co-founders and I are pondering whether we should re-evaluate each founder's shares at regular intervals, based upon on how much work each person has put in since the last re-evaluation. |
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Kekito is right. You can get yourselves in trouble, but the starting point is that you can agree anything you like, as long as you all agree on it. You should build some protections into this process. I could sketch some ideas, but without knowing exactly what you're doing, it would be useless. You need proper professional advice. |
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I don't normally respond to questions by saying that you need to talk to a lawyer, but in this case you should. I don't know if you can do what you want, but I do know that if you do it wrong, you are going to create a big mess for yourselves. What if there are four of you, and three of end up not liking the fourth for whatever reason, and then you decide to reduce his share from 25% to 1%? If your company is ever worth anything, then be prepared for a big lawsuit. Closely held (i.e., small) corporations have obligations to minority shareholders since the minority shareholders can't easily get out, and it is easy for the majority shareholders to take advantage of minority shareholders. Unfortunately, this is far too complicated an issue for a forum like this. |
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Let's deal with the legal side first:
Then:
I would never do that. Because of loss aversion -- basically, I see it as rife with conflict, and highly likely to cause a nasty breakup among the founders. I think you should look at vesting instead -- see this US law centric article to get an idea of what it is and look at past posts too. |
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