Granting a full co-founder 50% equity is a massive, often regrettable, early decision. A better model is to bring on a 'partner' with a smaller, vested equity stake (e.g., 10%). This provides accountability and complementary skills without sacrificing majority ownership and control.
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To maintain an owner's mindset, the speaker asked his new employer not to tell him the total number of company shares. This counterintuitive move prevented him from being demotivated by a small percentage and signaled extreme commitment, which ultimately led to his stake increasing from 0.4% to 20%.
Co-founding a business is often harder than a marriage, yet receives far less diligence. The probability of two individuals maintaining perfect alignment on effort, finances, and vision over many years is incredibly low, making solo ventures statistically safer.
To prevent the next generation of leaders from being burdened by debt, WCM's founders transfer their ownership stakes at book value—not market value. This massive personal financial sacrifice is designed to ensure the firm's long-term health and stability over founder enrichment.
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Don't default to a 50/50 split on day one. Instead, agree to formally discuss equity only after reaching a predefined milestone, like $10,000 in revenue. This allows you to base the split on demonstrated contribution and commitment, avoiding the resentment from premature, misaligned agreements.
To conserve cash, especially in a downturn, founders can pay key employees 10-30% below market rate in salary. The key is to compensate for this deficit by offering double or triple the industry standard in equity. This strategy attracts top talent aligned with long-term success while keeping the company's cash burn rate low.
Vested works directly with employees because startups find small, one-off secondary transactions burdensome due to legal fees and cap table complexity. However, this dynamic inverts at scale. Once Vested facilitates millions in transactions for a single company's stock, the startup has a strong incentive to partner on a formal liquidity program.
A business transitions from a founder-dependent "practice" to a scalable "enterprise" only when the founder shares wealth and recognition. Failing to provide equity and public credit prevents attracting and retaining the talent needed for growth, as top performers will leave to become owners themselves.
Don't let the cofounder dynamic run on autopilot. Proactively establish "vows"—commitments on decision-making and conflict resolution. Then, create a regular relationship rhythm for check-ins. This practice of stepping "onto the balcony" to observe the relationship is crucial for long-term health and success.
Vested neutralizes non-delivery risk, a major concern in private markets. By funding exercises, they ensure the employee retains a majority of their stock, aligning incentives. Small deal sizes ($50k-$100k) make it economically irrational for an employee to default and ruin their reputation, leading to a 100% delivery rate.