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Should you co-found a company with your friend? And how do you split the equity?

If you’re talking with cofounders about launching a new business, you’re fundamentally recruiting someone to take the job of partnering with you for the next decade.  I see a lot of founders who do less due diligence than I think ideal before making that long-term commitment.

Just knowing one another for a long time is not sufficient.  I suggest read Ready to Join a New Management Team? Here’s How to Do Your Due Diligence First.

Once you have established that you’ve identified the right cofounder(s), the biggest pain point is typically and unsurprisingly the equity split.  I suggest:

Gust’s equity split methodology


Splitting Equity With Your Co-founder? Here’s What You Need to Know

Giving Away Startup Ownership: How Much Is Too Much?

How to Split Equity Among Company Founders

A Founders’ Agreement: The Best Way to Avoid and Manage Co-Founder Conflict

How to Split Equity Among Co-Founders

Also relevant:

How to sell your professional background; I recommend share detailed resumes with your cofounders.  

How to negotiate a partner role at a VC or private equity firm.  I wrote this focused on an investor partnership, but I highlight here issues relevant to cofounders of any business.

Investment Banking in the Marriage Market: Find Your Dream Spouse without the Drama.  You’ll likely spend more time with your business partner than your spouse.  I suggest a very similar framework applies.

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  1. […] Is starting a company with a friend a good idea? David Teten digs into why and how to do business with friends and how to split equity. […]