Could equity distribution turn us from brothers into enemies?

This is an excellent question, and it's practically a rite of passage for all co-founding ventures. Will brothers turn into enemies? The answer is: Yes, but most likely not because of the act of "distributing equity" itself, but because "how it's distributed" and "what happens after the distribution" aren't handled properly.

Let me explain the pitfalls and principles in plain language.

1. The Biggest Pitfall: Distributing Equity Based on Brotherhood, Off the Cuff

This is the most common and most dangerous approach. "We're brothers, let's not talk about money, it spoils the friendship, let's go fifty-fifty!" Or "You put in more money, so you get the bigger share; I'll do the work, so I get the smaller share."

It sounds honorable, but within a year, conflicts will arise. Why?

• Psychological Imbalance of 'I've Contributed More': Starting a business is a marathon, not a sprint. Today you work more overtime, tomorrow I bring in a big client. Over time, everyone has their own scale, and they'll all feel they've contributed more. Why should they get the same/less equity? Human nature changes.
• Changes in Responsibilities and Commitment: Perhaps everyone started full-time, all-in. Later, one co-founder had family matters and became part-time. Or one co-founder progressed rapidly, becoming the company's backbone, while another remained stagnant. At this point, that initial 'eternal ratio' will seem particularly unfair.

Therefore, never determine equity based on feelings, relationships, or loyalty. This is putting your brotherhood on the line, and trouble will eventually arise.

2. How to Distribute Without Hurting Feelings? Address the Unpleasant Truths Upfront

True brothers dare to lay out the worst-case scenarios, discuss them, and find solutions together. Equity distribution is essentially a negotiation for a 'business prenuptial agreement.' The core isn't about dividing 'money,' but about dividing 'responsibilities' and 'the future.'

You need to sit down and calmly discuss a few key questions:

• What resources does each person bring?
  • Capital: Who invested how much real money? This is the most tangible.
  • Skills/Expertise: Who is the technical core? Who is the sales genius? Is this person's ability indispensable for the company at its current stage?
  • Full-time or Part-time: Who is going all-in, full-time, risking everything? Who is starting part-time to see how things go? Full-time contributors should definitely get more.
  • Ideas and Resources: Whose idea was this? Who can bring in key clients or industry resources?

Quantify all these factors, create a scoring table; it's much more reliable than making decisions off the cuff. There are many 'equity distribution calculation models' online that you can search for reference, but the core is that you must collectively agree on the calculation method.

3. The Absolutely Essential 'Safeguards': Vesting and Exit Mechanisms

These are the most important tools, bar none, to prevent brothers from turning into enemies!

• Vesting: In plain terms, it's an 'equity probation period.' It doesn't mean that if you're allocated 30% of the shares today, all 30% are immediately yours. Instead, it's agreed that you'll only fully own that 30% after, for example, working for 4 full years.

  • Typically, it's a 4-year vesting period with a 1-year cliff. This means:
    • You only receive 1/4 of your total allocated shares in one lump sum after completing 1 year of service.
    • If you leave before completing 1 year? Sorry, you get zero shares.
    • After completing 1 year, the remaining shares are gradually vested to you on a monthly or quarterly basis.
  • Is this fair? It's absolutely fair! It protects those who are still diligently rowing the boat. If a co-founder quits after six months, they shouldn't be able to walk away with a large chunk of the company's equity, leaving the mess for the others. This ensures maximum fairness for those who persevere.

• Exit Mechanism: Agree in advance on how to handle shares if someone leaves.

  • Is the company obligated to buy back the shares? At what price? (e.g., based on the company's net assets or the valuation of the latest funding round?)
  • Do the remaining co-founders have a right of first refusal?
  • If someone severely harms the company's interests, can their shares be forcibly reclaimed?

Put all of this in writing, sign an agreement. This isn't a lack of trust; it is, in fact, the greatest trust. Because it ensures that no matter what happens in the future, everyone has a clear framework to follow, operating by the rules instead of bickering and blaming each other.

Summary

Back to your question: Will equity distribution turn us from brothers into enemies?

• If you avoid the issues, distribute equity off the cuff based on loyalty, and have no governing mechanisms -> Most likely, yes. Because you've made friendship the foundation of your business, and the harsh realities of business will easily crush it.
• If you treat equity as a serious business matter, sit down to discuss it calmly and fairly, establish vesting and exit mechanisms, and sign an agreement -> Most likely, no. Because you've built a solid foundation of rules, separating friendship from business, allowing the rules to handle business issues while your relationship remains a friendship.

True brothers can shoulder burdens together and share profits together. And the rules for 'how to share profits' are precisely the best proof of whether you can endure challenges together. Agree on the unpleasant things first, then be gentlemen; only then can the business last, and the brotherhood endure.