Dear SaaStr: How should shares in a startup be divided between 4 co-founders? If we have equal shares, what if one of us puts in a cash injection at a later date?

You’ve got two good, different questions here.

Question #1: How should you divide shares up between 4 co-founders?

Here are the founder equity ratios at a bunch of SaaS and cloud leaders.  You can see the vast majority (85%) are not equal:

OK, now what if in the early days, one founder puts in a cash injection?

  • The simplest thing is to pick a low & fair price for the shares — and issue them more shares. E.g., you could pick at $2m nominal valuation, and if they inject $50k and the others don’t, they’d buy 2.5% more of the company. This is fair.
  • Less common is treating the cash injection as a loan, that you pay back when you can. But if it’s pretty small, this can be simpler. I’ve done both routes myself.

Finally, remember it’s better to have any tough conversations here upfront.

It’s very hard to fix these ratios fully later. It’s better to find out early if you’re not on the same page as co-founders.

At the Top SaaS Companies, Founder-CEOs Own ~15% at IPO. And Most Co-Founders Are Not Equal (And That’s OK). UPDATED

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