In a recent “On Air” Google Hangout from The Capital Network, Goodwin Procter partner and Founders Workbench contributor, Bob Bishop, discussed the most common issues founders face when launching a start-up.
In the first section of his presentation, Bob identified equity and co-founder relations as two key “danger zones” for founders. He highlighted two main questions to consider when it comes to equity and founder relations:
- What do I need to think about when choosing co-founders and building my team? Choosing your co-founders and building your team are some of the most critical decisions for every start-up and will ultimately determine the success of the company. Founders need to identify the areas of need within their company and put together a team with the skill set to tackle each piece of the pie. Personality, character traits and work ethic should not be ignored. You will be spending a lot of time together, especially in the early-stages of launching your company, so ensuring that you are equally committed and can work well together is extremely important and will help avoid friction down the line.
- How should the equity be divided? This is a discussion that should take place early on among the founding team to resolve issues at their onset, instead of waiting until they become larger problems that could potentially disrupt the company. The division of equity should not necessarily be on a pro-rata basis. You should consider relative contribution among the team – who came up with the idea, time commitment and other intangibles – when deciding how to split up the company’s equity.
To learn more about what to consider when building your team and how best to divide equity, watch the full Google Hangout with Bob Bishop.