I’ve spent the majority of my career working with early-stage companies and over the years I’ve noticed a number of, particularly first-time, entrepreneurs struggle with the idea of giving out equity. It may be in regards to investors, advisors, or cofounders but the challenge remains.
On the one hand, entrepreneurs are right to be cautious and calculated with how they dole out equity. You want to make sure you maintain enough incentive as the company grows and that those who receive it have rightly earned it. That’s exactly why nearly all VCs require founders to vest their shares over time. Who wants their cofounder running away with 40% of the company after spending 2 months on it? Without realizing it though, this can easily be taken to an unfortunate extreme.
I totally understand how hard it is to overcome this fear. It feels like you’re giving away a piece of yourself, of your future. The problem here isn’t over how much equity should be given to someone but that founders need to be able to separate their company from their own self-worth. It’s very easy to judge your own personal success and abilities based on the performance of the company. I encourage you to take a step back, honestly examine whether this holds true for you, and work to correct it as soon as possible.
Don’t worry, you’re not alone. There is a tendency to attach a very large sentimental value to your company especially if it’s your first. Founders who do this however tend to have a very difficult time making objective decisions. They get stuck spinning their wheels, wasting money and opportunities. Founders need to be able to look at their company objectively in order to have a realistic chance of being successful.
If you are having trouble with the idea of handing out equity, recognize that there is a larger problem going on and that this is just a symptom of it.
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