How To Split Equity In A College Startup

Snapchat Co-Founders
 Snapchat Co-Founders
 Stu  

Thinking of starting a startup with college friends? Not a bad idea. Many popular tech giants were started on college campuses. For example, Facebook and Snapchat. College startups are often the first entrepreneurial experiences for the co-founders. With this inexperience, it is important not to make amateur moves. One of the very first discussions between co-founders is often around who owns what. Here is an invaluable tip on how to split equity.


Evan Spiegel is the often-publicized co-founder of Snapchat. His right hand man and fellow co-founder, Bobby Murphy is still Snap’s CTO. Ever heard of a guy named Reggie Brown? Probably not. Well, Reggie was one of the three original founders back in 2011 on Stanford’s campus. Snapchat had to pay Reggie reportedly $157 million to buy him out of his stock even though Brown wasn’t contributing to Snap’s huge success.

Okay, you might be thinking this is an extreme story, but it’s really not. Many entrepreneurs, not just ones in college, run into this situation when their startup reaches success. Often inexperienced co-founders will split the equity evenly between each other. This can really come back to haunt the startup and its remaining founders down the road.

So here’s a tip: all shares should be subjected to vesting restrictions. What’s vesting? Vesting provides founders rights to equity over time, which gives them an incentive to contribute and remain with the company. Using this strategy, specific milestones should be defined in order to continue to accrue equity.

Imagine how often during college people change their minds, procrastinate, and decide to pursue other opportunities. The possibilities are endless and the odds are that the original founding team won’t stay intact for very long. The probably of someone leaving even further increases as graduation approaches.

Thinking of going into a startup with college friends? It would be wise to Google “vesting equity between cofounders” before you decide to split equity.

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