Few decisions a startup founder makes have a longer half-life than the decision to give away equity. A 2% slice handed to an early employee or a 15% chunk handed to an angel investor at seed stage shows up on the cap table for the rest of the company’s life, gets re-evaluated at every funding round, and ultimately determines how much value the founders keep at exit. Done thoughtfully, equity is the most powerful tool a startup has to attract talent and raise funds. Done casually, it can leave founders owning less than 20% of their own company by Series A and locked out of the decisions that matter most.
This article works through the two main reasons founders give away equity (talent and funding), how to decide how much equity to give in each case, and how to avoid the common mistakes that early-stage Irish founders make. It draws on patterns we see at Kinore across our startup client base and on observations from SeedLegals’ Michael McDowell and Irish investor Carey Smith, both of whom have flagged the cap table problems that follow when founders give away too much, too early, to too many people.
What does “giving away equity” actually mean for founders?
Equity is the ownership of a company, divided into shares. When you give away equity, you issue new shares (or transfer existing shares) so the recipient owns a percentage of the company alongside the founders. That percentage carries two distinct rights:
- Economic rights. The right to a share of dividends, proceeds at exit, and other distributions in proportion to your shareholding
- Voting rights. The right to vote on key company decisions, appoint directors, and pass shareholder resolutions
Both rights matter, and they do not always move together. Sophisticated investment deals can attach different rights to different share classes; for example, founders may keep voting control through “Founder Shares” even after their economic ownership drops below 50%.
Every time the company issues new shares, existing shareholders are diluted: their percentage ownership drops, even though the number of shares they hold stays the same. The dilution math is what catches first-time founders out. Giving 10% to an early employee, then 25% to a seed investor, then another 20% to a Series A lead investor does not leave the founders with 45%. It leaves them with much less, because each round dilutes the holders of every prior round.
Why do founders give away equity in the first place?
Two reasons dominate, and most early-stage Irish startups will face both within their first three years.
To attract talent
An early-stage startup cannot match the salary that mature tech employers pay. We advise founders to use equity to close that gap rather than to plug roles that should be paid in cash. Offering meaningful equity to the right hires (typically the first 5 to 15 people) closes the cash compensation gap and aligns the team with long-term outcomes. The right hire on the right equity grant becomes a co-builder rather than a contractor, which materially changes how the business behaves through difficult quarters.
To raise funds
External capital allows the company to invest ahead of revenue: build a product, hire a team, expand into a new market. Raise funds at the right time and the company creates more total value than it could organically; raise badly or too early and you simply give away ownership in exchange for cash you did not strictly need.
When equity is a red flag
The wrong reasons to give away equity are also worth naming. Using equity to “test” a hire whose role is not yet clear, to pay an external consultant for a piece of work that should have a fixed fee, or to keep a co-founder engaged whose contribution has trailed off, all leave dead equity on the cap table that will hurt the company at the next funding round. Equity is one of the few tools where saying no is almost always cheaper than saying yes too quickly.
How much equity can you afford to give away without losing control?
The biggest pattern Irish startup investor Carey Smith has called out across roughly 40 startups his firm reviewed is the same one we see in early-stage clients: more than half of those founders ended up owning 20% or less of their own company by the time they reached Series A. Some did this deliberately as the price of building a bigger business; many did it accidentally, by giving away too much at seed and not modelling the dilution forward.
A founder ownership health check across the next two rounds usually looks like this:
| Stage | Typical equity given away (per round) | Cumulative founder ownership (illustrative) |
| Pre-seed (friends, family, early angel) | 5% to 15% | 85% to 95% |
| Seed (institutional angels or seed funds) | 15% to 25% | 60% to 75% |
| Employee option pool (set up at or just before seed) | 10% to 15% reserved (not all issued at once) | 50% to 65% |
| Series A (lead VC investment) | 20% to 30% | 40% to 55% |
| Series B and beyond | 10% to 20% per round | 25% to 45% |
These are illustrative ranges; use them as a benchmark to sense-check your own cap table. Some founders end up holding more, some less, and the trajectory at later-stage rounds depends on how clean the foundations were. The point is to model the dilution forward at the start, not to discover at Series A that you cannot block a decision you care about because your ownership percentage has slipped below the threshold.
What ownership percentages matter for control?
Three numerical thresholds matter for control in an Irish limited company:
- Above 50%. You can pass ordinary resolutions (most day-to-day decisions, appointing directors)
- Above 75%. You can pass special resolutions (changing the constitution, approving a sale of the company)
- 25% or more. You can block special resolutions, which is the practical minimum founders should aim to retain through Series A if they want a meaningful voice in major decisions
Most investor deals also attach specific veto rights and board seats that operate alongside the raw shareholding percentages. Founders should pay as much attention to the rights of investor share classes as to the headline shareholding percentage; the legal terms in the shareholders’ agreement often do more to determine control than the cap table alone.
How do you decide whether to use equity to attract talent?
Equity for hires works best when:
- The role is senior or technically critical (a CTO, a Head of Sales, a key engineer)
- The person is bringing capability the founders do not have
- You want them committed for at least three years
- Cash compensation alone would not get the hire across the line
Equity for hires works badly when:
- The role is unclear or experimental
- The person can be replaced with a similar candidate within three months
- The grant is being used as a substitute for thinking about cash compensation properly
- Vesting is not in place, so the equity is lost the day the person leaves
Use a Key Employee Engagement Programme (KEEP) share option scheme where the company qualifies. KEEP options are taxed at capital gains tax rates rather than income tax rates, which can save the employee around 20 percentage points of tax versus an unapproved option scheme. Even if KEEP does not apply, structure every grant with four-year vesting and a one-year cliff so dead equity is not left on the cap table when someone leaves after eight months.
What about advisors?
Equity for advisors usually sits in the 0.1% to 1% range, vesting over 12 to 24 months, with a clear scope of expected involvement. Be specific: an advisor who provides one introduction a quarter is worth 0.1%, an advisor opening doors monthly to potential customers or investors is worth more. Vague advisor grants without milestones or vesting are the single biggest source of dead equity on early-stage cap tables.
How do you decide whether to raise funds (and how much equity to give in return)?
SeedLegals’ Michael McDowell has warned that giving small equity percentages to many people over time complicates future fundraising; investors scrutinise the cap table and an untidy one (with 15 individual angels holding 0.5% to 2% each, no formal lead, weak documentation) makes the next round harder to close. The lesson is to be deliberate about funding rounds rather than accreting equity opportunistically.
Practical questions before you decide to raise funds:
- What specifically does the cash buy you? A clear milestone in 12 to 18 months, not a vague “runway extension”
- Could you reach the same milestone without external capital? If yes, the cost of the dilution is real; if no, the funding round is justified
- What valuation can you justify? Higher valuations mean less dilution for the same amount of cash, but they also create higher expectations for the next round
- Who is the right investor for the stage? An angel investor at seed, a venture (VC) fund at Series A, growth equity at Series B. Matching the investor to the stage avoids both under-raising and over-raising
- What rights do you want to preserve? Board control, founder vesting protection, anti-dilution terms, drag rights, tag rights. These are negotiated in the term sheet
Aim to raise enough to hit a clear next milestone with three to six months of runway buffer, no more. Raising twice as much as you strictly need at twice the cost of dilution rarely accelerates the business twice as fast.
What does the right cap table look like at Series A?
A clean, fundable Series A cap table for an Irish startup typically has:
- Founders collectively holding 40% to 60% of the company
- One or two named pre-seed and seed investors, ideally institutional or recognised angel groups, holding 15% to 25%
- A formally structured employee option pool of 10% to 15% (typically expanded just before the Series A round)
- Small advisor grants (under 1% each), formally vested and clearly documented
- No “phantom” or undocumented promises floating around
If your cap table looks like that, your Series A is much easier to raise. If it looks messy, expect every potential investor to require a cleanup as a precondition of the deal, which costs time and goodwill at exactly the moment you do not want either.
The dilution math: a worked example
A two-founder team owns 100% (50% each) at incorporation. Over the next three years they:
- Set up a 10% option pool (founder ownership drops to 45% each)
- Raise €500,000 at a €2 million post-money valuation, giving 25% to the seed investor (founder ownership drops to about 33% each)
- Issue 4% of options to senior hires (founder ownership drops to about 32% each)
- Raise €3 million at an €15 million post-money valuation, giving 20% to the Series A lead (founder ownership drops to about 26% each)
That is a fairly typical Irish startup trajectory and leaves each founder with around 26% by Series A. Still above the 25% blocking threshold for special resolutions, but only just. A founder who started with a smaller share (say 40% rather than 50%) or who gave a slightly larger seed slice (30% rather than 25%) could easily be below 20% at the same point. Model your own scenario before you sign any term sheet.
The strategic question: bigger slice or bigger pie?
The honest framing is that giving away equity is a deliberate trade between ownership percentage and total company value. A founder who keeps 90% of a €2 million business is worse off than a founder who keeps 30% of a €30 million business. The right level of equity to give away is the level that maximises your expected absolute outcome, not your percentage ownership.
That said, the trade only works in your favour if the dilution actually buys the value it should. Equity given to a hire who underperforms or to a fund whose money was not strictly needed reduces your slice without growing the pie. Be deliberate, measured, and willing to say no when the trade does not stack up.
If you would like a structured conversation about your cap table, the implications of the next round on founder ownership, and the tax-efficient mechanisms for granting equity to staff, that is exactly the kind of work we do alongside our specialist solicitor partners. Book a no-pressure call with Kinore and we will work through your specific position before the next big decision.
Frequently asked questions about giving away startup equity in Ireland
How much equity should a CEO retain after Series A?
Most healthy Irish startup founder teams collectively retain 40% to 60% of the company after Series A, with the CEO individually holding 20% to 35%. Specific numbers depend on the founder team size, the rounds raised, and the option pool. Falling below 20% individual ownership at this stage is usually a sign that earlier rounds were structured poorly.
What is dead equity and why does it matter?
Dead equity is a shareholding held by someone no longer contributing to the company: a co-founder who left, an advisor who never engaged, an employee who departed before vesting was meaningful. It clutters the cap table, complicates future rounds, and uses up the equity that could be granted to active contributors. Vesting and clear scope on every grant largely prevent it.
Should I give equity to my co-founder?
Almost always yes, with a clear vesting schedule (four years, one-year cliff is standard) and a written shareholders’ agreement that covers good-leaver and bad-leaver scenarios. Co-founder equity without vesting is the single largest source of cap table disputes a few years in.
Can I claw equity back from an underperforming employee?
Only if vesting has been set up properly. Unvested options lapse on the day the employee leaves. Vested options are usually subject to a 30 to 90 day exercise window, after which they also lapse. Good leaver/bad leaver provisions in the share scheme rules can treat departing employees differently depending on circumstances.
What’s the tax treatment when I issue shares or options to staff in Ireland?
Tax treatment depends on the scheme used. Unapproved share options trigger income tax, USC, and PRSI on exercise, payable within 30 days under the RTSO regime. KEEP options trigger capital gains tax on disposal, not income tax on exercise, which is usually significantly more efficient. Direct share grants are taxed at the date of acquisition based on the market value less the price paid. Talk to your accountant before issuing any equity to staff so the structure is tax-efficient from day one.
The information provided in this article is for general guidance and informational purposes only. It does not constitute professional accounting, tax, or financial advice, and should not be relied upon as a substitute for advice tailored to your specific circumstances. While we take care to ensure the content is accurate and up to date at the time of publication, legislation, tax rates, thresholds, and compliance requirements in Ireland can change.
