Key insights

• ⏳ Equity splits should motivate co-founders for long-term commitment
• 💡 Negotiating equity split based on motivation, not negotiation
• 🔒 Equity safeguarded through vesting and a cliff mechanism
• 🎁 Offer generous equity with a vesting cliff to hedge your risks and motivate co-founders long term
• 🎯 Aim for co-founders who are motivated by their equity stake and feel like true owners of the company
• 🔮 Consider future motivation of co-founders when determining equity splits
• 🔑 Prioritize maximizing motivation of teammates over personal interests
• 💪 Founders should focus on maximizing team motivation rather than personal gains

Q&A

• When determining equity splits, what should be considered about the future motivation of co-founders?

  CEOs should consider the future motivation of co-founders when determining equity splits. If co-founders are not deemed worthy of a generous equity grant, it may be necessary to reevaluate the team composition to ensure long-term motivation and commitment.

• What should a CEO aim for in terms of co-founders' motivation and ownership?

  As a CEO, it's important to aim for co-founders who are primarily motivated by their equity stake and feel like true owners of the company. The equity split should create a sense of ownership and motivation among co-founders.

• How does offering generous equity with a vesting cliff help hedge risks and motivate co-founders long term?

  Generous equity, coupled with a vesting cliff, incentivizes co-founders to remain with the startup, especially during challenging times. It acts as a 'get-out-of-jail-free card' for incorrect co-founder decisions and creates long-term motivation for the co-founders.

• How is equity safeguarded through vesting and a cliff mechanism?

  Equity is safeguarded through a four-year vesting period and a one-year cliff. This means that the equity is earned over time, incentivizing the team to stay with the company, and the cliff ensures that if a co-founder leaves or is fired within the first year, they do not receive any equity.

• What should be prioritized when negotiating equity split with co-founders?

  The motivation of teammates should be prioritized over personal interests during equity negotiations. It's essential to maximize the long-term motivation of co-founders for the success of the company.

• Why is long-term motivation important when dividing equity with co-founders?

  Long-term motivation is crucial because it ensures that co-founders are committed to the success of the startup over an extended period, rather than focusing solely on short-term gains.

• 00:00 When dividing equity with co-founders, consider long-term motivation and time commitment.
• 00:48 Negotiating equity split based on motivation, not negotiation; prioritize maximizing motivation of teammates over personal interests.
• 01:25 Equity is safeguarded through vesting and a cliff mechanism. Four-year vesting and a one-year cliff ensure that equity is earned over a period of time and not immediately accessible. This motivates the team to stay with the company.
• 02:05 Offer generous equity with a vesting cliff to hedge your risks and motivate co-founders long term.
• 02:44 As a CEO, you should aim for co-founders who are motivated by their equity stake and feel like true owners of the company.
• 03:22 Consider future motivation of co-founders when determining equity splits. Reconsider team composition if co-founders are not worth a generous equity grant.