How to calculate startup stock distribution and allocation?

One of the founders should get 10% of the startup company on the formation stage. There are 10,000,000 authorized shares. How many shares this founder will get in case if the founders decided to allocate only 8,000,000 for founders and the rest for stock plan 10% and future investor 10%? 


To calculate percentage ownership, take the number of shares you were offered, divide it by the total number of fully diluted shares outstanding. How to allocate share in a start-up: 1. Determine the Founder Equity
2. Vesting Schedules
3. Divide the Equity

Answered 3 years ago

The question to answer is whether the founder will receive 10% of the current company, or 10% of the total=, potentially diluted company. Typically it is the former. Since stock plan pool and investor pool are currently holding place and have no shares, the Founder should receive 800,000 shares or 10% of the shares outstanding. Issuances from the other pools will be dilutive to them.

On the other hand, how many founders are there? 10? Unless there is a VERY strong argument for something else, I generally recommend that Founders receive equal amounts of ownership.

Answered 3 years ago

Outstanding shares are what constitute ownership, not authorized shares. It's unclear in your example what you mean by allocated. If you mean that all 10m authorized shares have been issued, with 8m given to founders and 2m sitting on the company's balance sheet in order to give to staff and future investors, then 10m represents the total ownership and you have to give this founder 1m shares in order for her to have 10% of the company.

But, if you mean that the company has only issued 8m shares so far out of the total 10m it is authorized to issue eventually, then that is the total ownership and 10% is 800k shares.

Hope this helps.

Answered 3 years ago

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