Fair Equity Splits: Beyond the Vision to Practical Allocation

Takeaway: While a 50/50 split is a common default for software startups, this simple approach often fails in synthetic biology, where the immense upfront value of contributed IP and specialized scientific expertise demands a more nuanced, contribution-based allocation.

Of all the conversations you'll have with your co-founders, the discussion about the equity split is one of the most emotionally charged and consequential. It’s a decision that codifies each founder's perceived value and will impact motivation, wealth, and control for the life of the company.

In the broader startup world, it is very common for two or three co-founders to keep things simple and friendly by splitting the equity equally. This "50/50" or "equal split" approach is often the default, built on a philosophy of equal partnership. However, for a deep-tech company in a field like synthetic biology, this simple default is not always as good a fit. It often fails to account for the highly asymmetric and "front-loaded" contributions that are unique to a science-based venture.

Why the 50/50 Split Can Be Problematic for SynBio

An equal split is based on the assumption that all contributions are of roughly equal value. This is often not the case in synthetic biology, where the company's entire existence may be predicated on a specific, pre-existing asset contributed by one founder. A truly fair allocation requires a thoughtful discussion that accounts for these unique variables:

  • Foundational, Pre-Existing IP: This is the most significant differentiator. Did one founder spend years of their PhD or postdoctoral research developing the core intellectual property—the novel engineered strain, the unique metabolic pathway—that is the entire basis for the company? This pre-existing, de-risked IP is an asset of immense value that was created long before the company was even conceived.

  • Specialized, Irreplaceable Expertise: Is one founder a world-leading expert in a specific and critical scientific discipline (e.g., protein engineering or fermentation scale-up) that is essential for the company's success and nearly impossible to hire for?

  • Capital Contributions: Is one founder providing the initial seed capital to get the lab off the ground while others are contributing only their time (sweat equity)?

  • Future Roles & Commitment: The founder stepping into the CEO role, who will bear the primary responsibility for fundraising and business strategy, often warrants a larger stake than a founder who will remain primarily in a research or advisory capacity.

A Framework for a Fairer Conversation

Instead of defaulting to a 50/50 split, use it as a baseline and then have an honest, structured conversation about whether that baseline needs to be adjusted based on the asymmetric contributions. "Score" each founder’s contributions across these key categories:

  • Idea and IP Contribution (The foundational science)

  • Initial Capital Invested

  • Level of Commitment (Full-Time vs. Part-Time)

  • Lead Role in Key Functions (e.g., CEO, CSO/CTO)

  • Relevant Experience & Network (e.g., a track record of successful biotech exits)

This process allows the team to have a transparent discussion. It can lead to the collective agreement that, while all partners are essential, a founder who is contributing a decade's worth of foundational, patentable research that underpins the entire venture has brought a unique and disproportionate value that should be recognized in the initial equity allocation.

Remember, no equity allocation is perfect without a robust vesting schedule. Vesting is the essential safety net that ensures that all equity, no matter the initial split, is earned through continued, long-term contribution to the business.

Disclaimer: This post is for general informational purposes only and does not constitute legal, tax, or financial advice. Reading or relying on this content does not create an attorney–client relationship. Every startup’s situation is unique, and you should consult qualified legal or tax professionals before making decisions that may affect your business.