Who’s the Boss?
When it comes to partnering with someone else, the only time a 50/50 equity split makes sense is when you can’t do it without the other guy. If this isn’t the case, the person who’s bringing more to the table should get more equity. Everything feels equal in a 50/50 startup, which can handicap you because it’s harder to make decisions. The company needs a boss to call the shots and keep things moving forward quickly. This is usually the person who owns more equity in the company.
There are a few ways to determine who should get more equity, but more is usually given to the person who came up with the idea, who has put in more time, and who brings more value to the table. If you’re pursuing a biotech solution, and your partner invented the technology over the last five years, it probably makes sense that she would be the majority owner. If you plan to quit your job and work on this full-time, while your partner can only commit 10 hours a week, you should get most of the equity. Give this a lot of time and attention—misallocating equity because no one wanted to broach the topic can lead to resentment that festers over time. It’s infinitely better to figure it out at the beginning.
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