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In 4 of the IPOs (Apigee, Mavenir Systems, Etsy, and Zipcar) the founders held no equity, meaning they had sold all their shares by the time the IPO took place (and in most cases were no longer with the company).
How do startups distribute stocks?
In general, startups typically authorize 10,000,000 shares of common stock….Dividing Equity
- Divide equity within the organization.
- Divide equity among company founders.
- Allocate money to investors.
- Divide the option pool into three groups: board of directors, advisors, and employees.
- Create a vesting schedule.
What is a secondary startup?
A “secondary” usually (though not always) happens when the startup has achieved significant revenue or traction and is seen as a “leader” in their market space, on the way to an IPO or a major sale. Since the company is already doing well, most secondaries involve sales of millions or even tens of millions of dollars.
How much equity should an independent startup advisor have?
As a rule, independent startup advisors get up to 5\% of shares (or no equity at all). Investors claim 20-30\% of startup shares, while founders should have over 60\% in total. You may also leave some available pool (5\%), but don’t forget to allocate 10\% to employees.
Do founders get preferred stock when raising capital?
Founders don’t get preferred stock. But it’s nearly impossible to raise venture capital without issuing preferred stock, or preferred shares. In most cases, VCs today won’t hand over a dime in exchange for common shares, the form of equity extended to founders and employees. Preferred stock, unlike common stock, is exactly what the name implies.
Who is involved in a startup equity split?
Very often not only co-founders, but also other people like investors, key employees, or advisors take part in the startup equity split. There are several levels of the priority list. Co-founders go first, then the interests of investors are considered.
Investors claim 20-30\% of startup shares, while founders should have over 60\% in total. You may also leave some available pool (5\%), but don’t forget to allocate 10\% to employees.