Splitting equity is an art and not science. One thing that should be kept in mind before splitting is - split the shares without giving away the company. You never know what your co-founder will do in a span of months whether he decides to walk away from the company and still retains the large portion of the company. It will be like giving the value of your hard work to a person who doesn\u2019t contribute to your success. Some of the points are already discussed above; a few more important factors that need to be considered before splitting.\r\nDon\u2019t Let Emotions Overcome Your Intelligence\r\nOur co-founders are generally our friends or family member to whom we have lot of attachment. We love them and, hence, we always get carried away by our emotions when it comes to any decisions related to them. Make sure, you don\u2019t do this when it comes to splitting the equity. You have to think rationally outside your emotions.\u00a0 You have to put that extra effort to take that decision of equity split.\r\nVest All Shares\r\nVesting of shares means that the founder will have to earn the equity shares as per the criteria mentioned in the agreement. Furthermore, if you don\u2019t have any agreement then get one. Irrespective of the divide, all the shares must be subject to vesting restriction. In India, vesting clause is not very common and hence people start the business merely on the faith that everything will go fine. But, it is always advisable to get things done on papers.\r\nFocus Should Be On Value Addition\r\nValue addition should always be the criteria on which every decision must be based. You don\u2019t need to compensate the time, but you must compensate for value. Value should be rewarded always. In the startup era, we always reward ESOP-based on hard work. But, this shouldn\u2019t be the criteria. Getting the thing done is far important than working hard. Hence, even if you are thinking of granting ESOPs to the employee, grant only if you see the skill that can add value to your startup.\r\nImportance Of Co-founder\u2019s Role\r\nThe equity split must also be based on your role as key personnel must get the premium over the non-key personnel. You may also prepare a table like out of my 10% pool, \u00a0% are for C grade employee and rest 2% for CTO\/CEO\/COO and 1% alone for the directors. You may prepare the table as per your wish.\r\n\r\nNumber Of Founders: Once the founder of Amazon said \u201cIf you can\u2019t feed your team with two pizzas, then its too large.\u201d rather I would say, if it comes to founders, don\u2019t make it more than 3. Two or three founders are more than enough.\r\nA List Of Pointers\r\nEven if you are still confused, then you may use the following pointers and discuss between the founders and your team. Give proper attention to every pointer and decide the equity sum accordingly. Here is the list of pointers:\r\n\r\n \tWho is the CEO?\r\n \tWhich founders are working full time? And which founders are working part-time?\r\n \tWhich founder absence will impact the chances of raising funding?\r\n \tWhich founder absence, will impact the marketing of the product?\r\n \tWho comes up with most of the features?\r\n \tWho can get the initial traction of the business?\r\n \tWho is well connected with your target audience and market? Who know the industry culture, its behavior the most?\r\n\r\nPractical Case study\r\nOne of my clients reached out to me for advice on a situation which was a bit different. They were 3 founders and were considering adding another person as a co founder but they were confused about how much equity they should give to him. So I asked them few questions:\r\n\r\nMe: Why you want him as a co founder?\r\n\r\nAns: Because we think that we need him to start our business.\r\n\r\n \r\nMe: Why you need him to start? Is he having any particular niche that your company cannot run without him?\r\n\r\nAns: Not as such, but he is the only guy who is putting money into our business and we need money to start our business and hence we need him for the start.\r\n \r\n\r\nMe: Is there anything else he is investing into the company apart from a lot of money?\r\n\r\nAns: No, we have the skill; we just need the money so he is taking care of it.\r\n\r\n \r\n\r\nMe: I don\u2019t think so that you should add him as a founder into your company. He is not the founder, he is the investor. You should know the basic fundamental difference between the founder and investor. He is only investing money and he is into your business. He doesn\u2019t bring any value addition to the company. Founders are the people that add value to the business and without them you cannot start your business. Here money is not the niche you should look for considering any person for the job of founder. Hence, I would say include him as an investor and not as a founder.\r\nConclusion\r\nOnly you can value the importance of equity in your startup. These decisions shouldn\u2019t be taken in a hurry. Be patient and apply your brains to the situation, consider all the valid points and divide the equity in such a way that everybody is satisfied with the divide and a solid base is formed.