How to Effectively Split Startup Equity

Founders are inevitably challenged with the decision of distributing the startup equity of their company. Oftentimes, the results aren’t favorable. So let’s take a look at how one startup founder views this pivotal decision.

Meet Gregg Pollack, he recently sold his company for $36 million and naturally decided to take some time off to press the reset button on his work and personal life. Since returning to his home in Orlando, he has started documenting challenging topics that entrepreneurs face on the daily.

I’m excited to share the content he’s created and encourage you to subscribe to his channel and follow along because you’ll find there’s a lot you can learn from a guy like Gregg.

“About 8 years ago equity broke my business and severed one of the best friendships I ever had. If we would have set things up more fairly in the beginning this all would have been avoidable. Instead we had to dissolve the business and abandon the brand we both worked so hard to create.

In case you’re not familiar, your “equity” refers to how much you own of a business. In the startup world it’s what I might want to pay you until we start making cash. Equity is kind of like a promise for future cash. If you work for me for equity I’m promising you I’ll try to make it worth a lot some day when we sell the business or some other financial event occurs.

In my opinion the only fair way to do equity is something called the Dynamic Equity Split. Instead of equity being divided up in the beginning (too early) or when investment comes (too late) this method divides up equity as the company is built. Equity is dynamically based on the quantity of resources each person puts in.”

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Only Fair Way to do Startup Equity | Part 1