Design an Equity Allocation Model for Co-Founders and Early Team

Build a fair co-founder equity split using a weighted scoring model, vesting schedules, option pool strategy, and cap table scenarios.

๐Ÿ“ The Prompt

Act as a startup legal and equity strategist with deep experience in cap table management. Help me design a fair and defensible equity allocation model for my startup [STARTUP NAME] in the [INDUSTRY] sector. Here are the details: - Number of co-founders: [NUMBER OF CO-FOUNDERS] - Each co-founder's role: [LIST ROLES, e.g., CEO, CTO, COO] - Each co-founder's contribution type: [e.g., idea originator, full-time technical build, part-time strategy, capital contribution of $X] - Stage of company: [IDEA / MVP / REVENUE] - Planned employee option pool: [PERCENTAGE, e.g., 10-15%] - Expected fundraising timeline: [TIMELINE] Please provide: 1. **Equity Split Framework** โ€” A weighted scoring model that factors in: (a) idea contribution, (b) execution risk and time commitment, (c) domain expertise, (d) capital invested, (e) opportunity cost, and (f) role criticality. Assign relative weights to each factor and explain your reasoning. 2. **Vesting Schedule Recommendation** โ€” Standard vs. custom vesting structures, cliff periods, and acceleration clauses with pros/cons for each. 3. **Option Pool Strategy** โ€” How to size the ESOP, when to create it, and how it impacts founder dilution pre- vs. post-funding. 4. **Scenario Modeling** โ€” Show how the cap table evolves through seed round, Series A, and Series B assuming [DILUTION PERCENTAGE] dilution per round. 5. **Red Flags & Negotiation Tips** โ€” Common equity mistakes early teams make and how to structure difficult conversations between co-founders. Present the scoring model as a table format I can fill in, and include a sample cap table evolution chart.

๐Ÿ’ก Tips for Better Results

Never split equity equally by default โ€” use contribution-based weighting to prevent future resentment. Always implement a 4-year vesting schedule with a 1-year cliff, even among best friends. Consult a startup attorney before finalizing any equity agreements.

๐ŸŽฏ Use Cases

Startup co-founders and early-stage teams who need to divide equity fairly and set up a scalable cap table before fundraising or hiring.

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