Dead equity

A meaningful stake held by someone no longer contributing to the company.

Example

A co-founder who left after four months still holding 40%.

Important

Investors treat dead equity as a serious problem — it demotivates everyone still working and there is no clean way to undo it. Vesting is the prevention.

Related terms

• Vesting — Earning your shares over time rather than owning them all immediately.
• Cliff — An initial period during which no equity vests at all. Leave before it and you get nothing.
• Cap table — The record of who owns what part of the company — founders, employees, option pool and investors.
• Founder equity split — How ownership is divided between the founders at the start.

Lessons that explain it

• Do you actually need a co-founder? — The honest case for and against. Solo founding is harder but not disqualifying, and a bad co-founder is much worse than none. (10 min)
• The conversation to have before you commit — Fifteen questions that feel awkward now and prevent the disaster later. Have this before any equity is discussed. (15 min)
• Splitting founder equity — Not based on who had the idea. Based on what each person brings from here — and it should be a real conversation, not a reflex 50/50. (12 min)
• Vesting and cliffs — Why founders should vest too, and why the one-year cliff protects everyone — including the person who leaves. (12 min)

All 176 terms in the Founder glossary