Dead Equity

Ownership held by people no longer contributing to a company, such as departed co-founders or inactive advisers.

Example

A co-founder who left after one year with 25% of the company fully vested.

It permanently dilutes the people still building the company and can make later investors reluctant.

Cap Table — The running ledger of who owns what percentage of a company, on what instrument and what terms, before and after each financing event.
Vesting Schedule — The timetable over which employer contributions or equity become fully owned by an employee.

What the cap table tells you that the founders did not — A cap table reveals founder motivation, past decisions and future obstacles. Low founder ownership, dead equity, unconverted instruments and messy structures are signals worth reading before investing. (10 min)
Vesting decides who keeps equity; the pool decides how much is left to give — Founder and employee shares are usually earned over time. Vesting protects the company from dead equity, and pool size determines whether it can hire without another dilutive top-up. (11 min)
The co-founder relationship is where many startups actually fail — Diligence on a founding team examines how the founders met, how long they have worked together, how they divide decisions, how they resolve disagreement and how they split equity. (10 min)
A founder who leaves without vesting can own a third of the company forever — Founder agreements, vesting and leaver provisions decide what happens when a founder departs. Diligence confirms they exist, are signed and would work as intended. (10 min)
Look for complementary skills, real commitment and a high learning rate — Team evaluation means examining whether the founders cover what the business needs, whether they are genuinely committed, and how quickly they change their minds when evidence arrives. (12 min)