I gave my CTO only 10%. He delivered like he owned 50%

I gave my CTO only 10%. He delivered like he owned 50%

And the more the startup kept winning, the more resentful and unmotivated he became.

When we sold the company for $100M, he walked away with barely enough for a house in California.

This is one of the hardest decisions you'll have to make as a founder/CEO.

In this case, the CTO truly delivered. He built a great product that made the company successful.

But at the beginning? It wasn’t clear.

The co-founder relationship was rocky. The seed lead investor was pushing for a more experienced CTO with shiny CV.

By the time it was clear this CTO had delivered—about a year in—the company was already too valuable to just issue more equity without crushing him on taxes or diluting existing investors.

Fixing the equity imbalance was impossible.

So we didn’t.

And it left a scar.

I’ve seen this play out so many different ways. Here are real stories from startups I’ve worked with:

1. Founder gave 10% to the CTO.

He never delivered—and sued the company for his stake.

(This litigation is still ongoing, even though the company is winning… because Lexsy had put a solid consulting agreement in place.)

2. Co-founder was supposed to get 20%.

There was a romantic thing going on between the CEO and CTO.

They broke up.

The co-founder relationship fell apart.

He was terminated—but the big law firm mishandled the termination (getting "for cause" vs "without cause" wrong is a million-dollar mistake).

Now litigation is costing the company millions annually, the drama went public, and board members are resigning under pressure from the litigating CTO.

3. CEO and CTO went 50/50.

The CEO did all the work.

The CTO only quit his job after the CEO raised $5M from a16z.

Then turned toxic.

Luckily, the termination was handled correctly—and he had to leave.

(He later joined one of the FANGs he used to criticize.)

There’s no one right way to split equity.

But there are some best practices that protect you from ending up in a horror story:

Here's what I recommend:

1. 4-year vesting minimum.

With a cliff (i.e., 1-year)—no exceptions.

Longer vesting (5–7 years) is totally fine, especially for founders, since it does take 5-10 years to build a unicorn.

By the end of the cliff, be crystal clear if you’re continuing together.

Otherwise, you’re just adding dead equity to your cap table—or opening yourself up to a lawsuit.

2. If you're splitting up, sign a separation & release agreement.

Early-stage founders who leave should end up with no more than 3–5%.

Once you’re past Series A/B and someone has vested and helped build the company, it’s a different story. But at the seed stage? You can’t afford dead weight on the cap table.

3. Each founder should have their own lawyer.

Company counsel does not represent founders. It represents the company.

At the beginning, everyone's interests seem aligned.

But when you’re negotiating equity or your company starts becoming valuable, get your own lawyer. Especially when millions are at stake.

Bottom line:

Not everyone is built to be a founder.

Startups are pressure cookers—high stakes, constant uncertainty, insane lows.

You don’t know how your relationship will evolve or how valuable someone will become.

But your equity decisions will echo through your whole journey.

Protect yourself early.

If you're about to start a startup, our Startup Launch Package helps you get things right from the beginning.

If you already have a running startup and want to ensure everything is in order, our Startup Due Diligence Package or GC Subscription Package is the right next step to audit and clean up your company.