"They're just coding" is a phrase that has caused some of the most painful founding team splits in startup history. Building a product from zero — with no guarantee the company will survive — is a high-risk, high-value contribution that needs to be compensated accordingly in equity, not treated as a service delivery.
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A technical cofounder working full-time for zero salary is contributing two things: the market value of their time (what a developer contractor would charge) and the risk premium on that foregone income. In a dynamic equity model, both factors are captured through the contribution log and multiplier. The key difference from a business cofounder lies in the market rate for each role and the multipliers applied — not in some subjective notion of one being "more important."
If the technical cofounder built a working prototype before the company was incorporated, that IP may or may not legally belong to the company. Formalizing IP assignment at incorporation is essential — and compensating the technical cofounder for that assignment in equity is reasonable. Some teams give the technical cofounder a small fixed equity grant specifically for pre-incorporation IP contribution, on top of their ongoing dynamic equity participation.
Unassigned pre-incorporation IP is a due diligence blocker
If the technical cofounder built a working prototype before the company existed, that IP may not legally belong to the company. Formalize the assignment at incorporation — and it's reasonable to compensate that transfer in equity.
Business-side founders sometimes treat the technical cofounder as a vendor: low equity, expectations of delivery, limited decision-making authority. This usually ends badly. A technical cofounder who feels like an employee with a small equity stake will eventually leave for a salary — right when the product needs the most technical attention. Fair equity and genuine cofounder status create the alignment that keeps technical talent committed through the hardest phase.
If both cofounders are full-time from the start, equity should be close to equal — differentiated by other factors like capital contributed or prior IP. Ranges of 30-50% for a technical cofounder in a two-person team are typical.
Yes. All IP created in connection with the company's business should be assigned to the company via an IP assignment agreement at incorporation. This protects the company in future due diligence.
Common approaches: value hours at market rate and apply a multiplier consistent with the dynamic equity model, or grant a fixed equity block for the prototype as part of the founding agreement.
Equafy's dynamic equity model captures every type of contribution — time, code, IP, capital — and turns it into a fair, transparent ownership stake.
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