What founders get wrong about equity

By 20VC

Categories: VC, Startup

Summary

FOMO's CEO reveals counterintuitive equity strategy: they gave non-founders larger equity stakes than typical, ran salary-free for 8 months, and maintain a 17-person flat organization with zero one-on-ones. The key lesson: momentum matters more than conventional startup structure.

Key Takeaways

  1. Give non-founders equity percentages typically reserved for founders to align incentives and reduce need for early-stage salaries. FOMO's team took no pay for the first 8 months.
  2. Use equity strategically to defer cash burn during early development. When team members have meaningful ownership, they'll bootstrap longer without salary.
  3. Maintain flat organizational structure with 17 people and eliminate one-on-one meetings to reduce overhead and improve communication velocity.
  4. Time your fundraising announcements strategically—wait to announce your previous round completion before launching the next round to build momentum.
  5. Prioritize momentum above all else when making operational decisions. This principle should guide equity distribution, team structure, and fundraising timing.

Related topics

Transcript Excerpt

We gave non-founders a percentage of the company that usually founders get. For the first eight months of building, no one on our team took any pay. And it was mostly because >> Today we have Paul ah Lian, our co-founder and CEO of FOMO on the show. Now, FOMO is a wild story. Despite the company being a wild success today, they only have 17 team members, no internal hierarchy, and they have no one-on-one meetings. >> One thing that I discovered, if you're trying to raise another round, wait to announce your last round. >> I love non-obvious stories, and when you unpack this one, there are so many gems to uncover. >> Everything is about momentum.…

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