Equity & cap tables — the math that owns your future

The 50/50 default: most successful early-stage companies start with co-founders at 50/50 (or 33/33/33 for three). It signals partnership, simplifies decisions, and avoids the friction of one founder feeling underweighted later. The exceptions:

• Significant prior contribution (months of work, prior code, customer list)
• Outside investment from one co-founder
• Differential skin in the game (one quitting a job to do this full-time, one moonlighting)

When splits should NOT be 50/50: when one co-founder is part-time, when one is significantly less experienced, or when the idea is single-author and the second co-founder is joining a thesis already proven.

Fixing a bad split: If you locked in 50/50 and it's now obviously wrong, the only honest fix is renegotiation with full transparency. Founders who avoid the conversation grow resentful and the company suffers. Use formal mediation if the relationship can't sustain a direct conversation.

Always vest founder shares. Always. Even if you're a solo founder. Especially if you're a solo founder.

Standard vesting: 4-year, 1-year cliff, monthly thereafter. After year 1, you've vested 25%; after 24 months, 50%; and so on. Without the cliff, an employee who leaves at month 3 has earned 1/48th of their grant — usually a paperwork mess for everyone.

Refresh grants: top performers should get a refresh grant at year 2-3 (typically 25-50% of the original grant) to extend their vesting horizon. Otherwise their incentive cliff hits at year 4 and you risk losing them just as they peak.

Option pool sizing: the standard at seed is 10-15% of post-money. The right number is the one that covers your hiring plan for 18-24 months — model it bottom-up:

• 5 engineers × 0.5% avg = 2.5%
• 2 senior leads × 1.5% avg = 3%
• 3 contractors / advisors × 0.25% avg = 0.75%
• 20% buffer for surprises = 1.25%

Total: ~7.5%, not 15%. Investors will push for more because they want pool dilution to come from existing holders (you) rather than themselves. Push back with the hiring plan as evidence.

83(b) election (US): file within 30 days of receiving founder shares or unvested options that you've early-exercised. Missing the window converts what would be capital gains at exit into ordinary income. Most founders who miss it lose 6-figure sums at exit; lawyers can't fix it after the fact.

409A valuation (US): the IRS-approved fair-market valuation of common stock, set by an independent firm. It's the strike price for your option grants. Refresh every 12 months or after a material event (priced round, big revenue milestone).

SAFEs are deceptive because they don't show up as ownership until they convert. A founder with two SAFEs at $5M and $7M post-money caps thinks they own 100% of the company. After conversion in a $10M pre-money priced round, both SAFEs convert at their caps:

• SAFE 1 ($5M cap, $500k invested) → 10% of post-money
• SAFE 2 ($7M cap, $750k invested) → ~10.7% of post-money
• New round investor (priced $1.5M into $10M pre): ~13.0% of post-money
• Pool top-up to 10% post-money: ~10% of post-money

Founder ownership: from 100% to roughly 56%. In a single conversion event.

The math you must do: before signing any SAFE, model the fully-diluted ownership after conversion at each likely round outcome. Use the Dilution Calculator. Sign nothing without the model.

Side letters and special rights: investors often ask for pro-rata rights, information rights, or board observer seats via side letters that aren't visible on the cap table itself. Track every side letter — they accumulate fast and reduce founder optionality at later rounds.