Recommended Early-Stage Equity Structure (Pre-Funding)
| Shareholder / Pool | % of Fully-Diluted Shares | Vesting Terms | Key Rationale |
|---|---|---|---|
| Founder (CEO / business lead) | 42 % | 4-year vesting with 1-year cliff (standard) | Owns vision, go-to-market, fundraising. Keeps plurality control but leaves room for option pool & future raises. |
| Tech Cofounder (CTO) | 38 % | Same 4-year / 1-year cliff; add double-trigger acceleration on change-of-control | Parity in value creation while acknowledging slightly later entry or smaller cash investment than CEO, if any. |
| Employee Stock Option Pool (ESOP) | 15 % | 10-year term options, refresh pool after each financing | Needed to hire first 5–8 engineers, PMs, design & GTM talent before Series A. |
| Advisor Pool (optional) | 2 % | 2-year vesting, quarterly | Strategic advisors, industry experts. |
| Company Treasury / Reserved | 3 % | — | Buffer for future grants, convertible-note caps, micro-acquisitions. |
| Total | 100 % | — | Fully-diluted cap table prior to outside investment. |
Snapshot: Founder retains a slim majority when counting any unissued treasury shares they control (42 % + 3 % = 45 % voting power). Tech cofounder is a true partner at near-parity. A 15 % ESOP is large enough to stay competitive through Seed, yet small enough to preserve both founders above 30 % after a typical Seed round (< 20 % dilution).
Vesting & Acceleration Details
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Founder & CTO Stock Purchase Agreements
- 4-year vesting, 1-year cliff, monthly thereafter.
- IP assignment & non-compete (12 months) baked into the agreement.
- Double trigger: if the company is sold and the employee is involuntarily terminated or leaves for good reason within 12 months, the unvested balance accelerates.
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ESOP Mechanics
- Initial pool strikes at FMV determined by 409A (US) or local appraiser.
- 4-year vest/1-year cliff for employees; advisors on 2-year monthly.
- Refresh the pool to ~10 % on every new priced round to avoid over-diluting early hires.
Cash Compensation Guidelines (Bootstrapped / Pre-Seed)
| Role | Suggested Cash (USD, Bay-Area equivalent) | Notes |
|---|---|---|
| Founder (CEO) | $0–$80 k | Defer cash to maximize runway; take only if profitable or funded. |
| Tech Cofounder (CTO) | $60–$120 k | Slightly higher to offset opportunity cost; still well below market. |
| Early Engineers / PMs | 50–70 % of market + 0.25 – 2 % equity each | Tie cash to milestones (MVP, ARR targets). |
Preparing for External Capital
| Stage | Target New Capital | Typical New Investor Ownership | Post-Round Founders’ Collective % |
|---|---|---|---|
| Pre-Seed SAFE / Note | $250 k – $1 M | 10–15 % (post-money cap) | ~60–65 % |
| Seed (Priced) | $2 M – $4 M | 15–25 % | 45–55 % |
| Series A | $8 M – $15 M | 20 % | 35–40 % |
Founders keep meaningful control through Series A while retaining upside for later rounds.
Practical Tips
- Document everything early: cap-table spreadsheet (Carta, Pulley), invention-assignment, NDAs.
- Reverse-vesting for any pre-work: if the CTO has already built an MVP, carve out up-front vested shares for that contribution, then vest the rest.
- Board structure: stay at 2 founder seats + 1 independent until Seed.
- Re-evaluate pool size annually: avoid over-allocating unused options that dilute founders and early investors.
- Mirror cash & equity to contribution: if the tech cofounder eventually handles fundraising or the CEO codes extensively, adjust future grants or bonuses rather than rewriting the initial split.
Why This Split Works for an AI SaaS Startup
- Heavy technical moat → higher CTO equity (≥ 35 %).
- Long talent war → generous ESOP up front.
- Capital-efficient SaaS → founders can self-fund early, so equity is the prime currency.
- Future AI infra costs → runway matters; holding some treasury stock offers room for convertible debt or SAFE top-ups without immediate dilution.
Use this as a starting template, then tailor percentages to actual contributions (prototype already built, cash invested, prior exits, etc.) and local legal norms.