Equity split with a technical co-founder: how much to give and how to protect it

How do founders actually split equity today?

More equally than they used to. Carta, the cap-table platform used by many US startups, has data on the shift going back a decade.

The argument behind the trend is old. In 2015 Y Combinator's Michael Seibel wrote that ‘equity should be split equally because all the work is ahead of you’ (How to Split Equity Among Co-Founders). The idea and the first few months weigh little against the seven to ten years it takes to build a company, and a co-founder with a token stake signals to investors that the CEO does not value them.

Which factors should change the split?

Commitment, risk and future contribution should count far more than who had the idea. We use the grid below to surface real differences between founders before anyone names a number; it is a conversation tool, not a calculator.

If the grid produces a huge gap, ask whether you are talking about a co-founder at all. Paying an early developer partly in equity is a different arrangement, covered in paying developers with equity.

How does founder vesting work?

Vesting makes founder shares ‘earned’ over time: leave early and you keep only the vested part, while the rest returns to the company. The common standard, which YC also recommends, is four years with a one-year cliff, so nothing vests if you leave in the first twelve months; then a quarter vests and the remainder monthly.

It matters because founding teams split up more often than founders expect. Among two-founder startups formed on Carta between 2016 and 2021, between 25% and 35% had split up within five years. Without vesting, in a 50/50 split, someone who leaves after six months keeps half the company, and every future investor will notice.

In the US, founders who receive restricted stock subject to vesting usually consider a section 83(b) election, which must be filed no later than 30 days after the shares are transferred; the IRS now publishes Form 15620 for it. Miss the window and it is gone, so speak to a tax adviser before you sign.

What changes if the company is Italian?

If you are a foreign founder incorporating an Italian S.r.l., the mechanics differ. Italian law has no statute dedicated to vesting: it is built with clauses in the articles and a shareholders' agreement, for example call options over unvested quotas. The Civil Code gives useful levers:

• Quotas need not follow cash contributions: by default they are proportional to contributions, but the deed of incorporation can provide otherwise and grant individual members particular rights over management or profit distribution (Art. 2468).
• Work as a contribution: a member can contribute services to the company, backed by an insurance policy or bank guarantee for their full value (Art. 2464).
• Exclusion for just cause: the deed can list specific cases in which a member may be excluded (Art. 2473-bis).
• Classes of quotas: SMEs set up as an S.r.l., innovative startups included, may create classes of quotas with different rights (Art. 26(2), Decree-Law 179/2012).

Does code the co-founder already wrote belong to the company?

Not until it is assigned. Code written before incorporation, or outside any contract, belongs to its author, and investors check this early in due diligence. Our guide to who owns the code in a software contract explains the written-assignment rules in the EU, UK, US and Italy. The same goes for anything the co-founder registered personally before the company existed, such as a domain name, a repository or a developer account on the app stores: move each one into the company's name before the first investor asks.

What belongs in the founders' agreement?

Everything you will need on the day you disagree. The minimum list to take to your lawyer:

1. Roles and responsibilities of each founder.
2. Vesting length, cliff and what happens to unvested shares.
3. Different treatment for good leavers and bad leavers.
4. Assignment to the company of code, trademarks and other IP already created.
5. How deadlocks are broken when founders hold equal stakes.
6. Limits on transferring shares to third parties.

If you are still choosing between a co-founder and an outside team, our guide on how to choose a software development company covers the vendor route, and a startup studio, incubator or agency each ask for very different amounts of equity.