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Dead equity: Why it’s a conversation you want to keep alive

Dead equity startup tips and advice
Image credit: fizkes / Shutterstock

We occasionally come across companies where one of the original co-founders has left the business. Founders may struggle with remaining positive in those hard early years where sales cycles are long and enter the famous ‘trough of disillusionment’.

Others might not be at financial liberty to continue investing their time in a high-risk startup while their bills mount, or they may fall ill.

There are a host of other reasons why someone may want to leave an early-stage company. People change, and expectations do not always live up to reality. Nobody said that starting a company is risk-free. In fact, it’s quite the opposite.

Either way, what a remaining co-founder wants to avoid is the situation in which a co-founder departs but insists on keeping all their equity. This is known as “dead equity” i.e. equity owned by people no longer actively involved in building the business....