I recently was introduced to a new startup company where the four Co-Founders all had equal ownership. This company did not retain my consulting service, so I will not give them strong advice but I hinted that that may want to re-think the equity allocation. In the past I had provided consulting advice to two startups where the Co-Founders had equal equity ownership. There were significant problems and bad feelings after about one year of operation. After one year of operation, it became evident that the Co-Founders' talent, knowledge, experience, energy/time devoted to the business, and positive contributions to the business were not all equal. In both cases it took considerable negotiation and effort to adjust the equity division of the C0-Founders that were acceptable to all involved.
It is highly recommended that a startup business of C0-Founders should allocate equity ownership as a function of talent, knowledge, experience, and anticipated future contribution. The CEO should have greater ownership than the VPs of the company.
Thomas Hong
Board of CEOs
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