Stephen R. Poland > Quotes

“Three Rules for Founder Equity Decisions Supplementing many years of guiding startup founders in equity split discussions with research on equity split best practices, we’ve developed three guiding “rules” for founders to follow when talking about equity splits. Here they are: Rule 1: Fairness above All Else Rule 2: Everybody Vests Rule 3: Set It and Forget It Rule 1: Fairness above All Else When it comes to the ownership of your startup, you always want to be certain that the equity structure of the startup is fair to all the founders. Many challenges occur while building a new company. When things get hard, you don’t want lingering feelings of unfairness adding to the difficult times. Equal is Fair. Equal ownership meets the fairness requirement, and that’s why the section on equity split methods covers equal splits first. While the math for an equal split is super easy, you want to be sure you have been thoughtful about selecting an equal split. You don’t want to choose an equal split just because it was the path of least resistance. Un-equal may also be fair. Alternately, if meeting the fairness requirement means that founders decide to divide the equity of the startup”
― Stephen R. Poland, Founder's Pocket Guide: Founder Equity Splits

“The common practice is for the option pool to be established on the pre-money valuation, and therefore the founders and any other existing shareholders are hit with the dilution effect of the option pool, but this can certainly be negotiated.”
― Stephen R. Poland, Founder’s Pocket Guide: Term Sheets and Preferred Shares

“A term sheet is not a contract or a promise to invest, but rather an agreement in principle that outlines the terms of the investment deal. Just because you have a signed term sheet does not mean the investment deal is completed.”
― Stephen R. Poland, Founder’s Pocket Guide: Term Sheets and Preferred Shares

“One of the early tasks facing founders at the formation stage of the startup is deciding the equity ownership split between multiple co-founders. Many teams are tempted to divide the company ownership into equal parts—that is, two founders equals a 50/ 50 ownership split or three founders results in a 33.3% share for each founder. Other situations demand a more thoughtful approach. For example, one founder might be bringing the core technology and associated expertise to the startup and would therefore request a larger equity stake. Regardless of your equity split decision, once all the co-founders reach an agreement, log the equity split in the cap table. The “Founders’ Round” section below walks through this beginning entry.”
― Stephen R. Poland, Founder’s Pocket Guide: Cap Tables