Co-founders: Share the Vision First, Then Split Equity
Equity allocation is relative, not absolute: if the company reaches $1 billion, 1% is $10 million. So the sequence when finding a co-founder can't be reversed: first share the vision — if they don't buy in, even giving them 100% is useless; then discuss roles, contributions, and equity split; finally, address the hardest topic: a four-year lock-up and exit mechanism.
If the company succeeds, whatever you hold as a co-founder is a lot of money. If it reaches $1 billion, 1% is $10 million; if you accidentally build another Tencent, what is 1%? So the real question at the negotiating table is whether the other person believes you can build something great together — "should I take 20% or 25%" comes after that. If they don't believe in it, what's the point of giving them 100%?
Lei Jun's approach to recruiting six partners can be summarized in five steps. Click "Next" to walk through a co-founder negotiation from start to finish.
Both are Xiaomi co-founders, yet the negotiation looked completely different. The only common thread: giving the other party a genuine sense of ownership — they are owners of the company, not hired key persons.
Li Wanqiang · A Decade of Collegial Trust
Li was the General Manager of Kingsoft PowerWord. After leaving, he said he wanted to do commercial photography. Lei Jun said "stop kidding, I'm starting a company, come with me." He guessed Lei was going into phones and came along — without knowing salary or equity. Ten years as colleagues: "I trust that he trusts my judgment like that."
Lin Bin · An Offer He Couldn't Refuse
They had known each other for two years and had talked many times — not once or twice. Lin had a great job and came with almost no salary. Lei Jun thought long and hard: "I want Lin Bin to co-found with me and work for a lifetime — what offer can I make that conveys my sincerity and makes it impossible to refuse?" He made the offer; Lin accepted.
Multiple rounds of discussion are also important — the process is each person syncing expectations. But watch for the subtle things: never let the discussion damage the relationship. Once feelings are hurt, collaboration becomes very difficult. This is more complex than a regular business deal; always be mindful of the other person's feelings.
After being involved in founding over twenty companies, this is Lei Jun's advice to everyone: lock all co-founder equity for four years — if you leave before four years, you get nothing. "A founder's equity is a lifetime commitment. If you're really building a century-long enterprise, four years is nothing."
The Cost of No Lock-up: The Bank Manager CFO
A three-to-five person startup hired a big bank branch manager as CFO and gave him 10% equity. Lei Jun asked if they could agree to a four-year lock-up; the manager said "talking about this with a friend feels disloyal." Six months later it didn't work out, the manager wanted to leave but kept the 10% — it cost a huge sum to buy it back. Lei Jun told the founder: if your dream is a billion-dollar company, whatever price you pay to buy it back today is cheap. If it drags into a Series A or B round, the number becomes astronomical.
The same co-founder leaves at different points in time — how is equity handled? Click a time point to see the difference with and without a lock-up.
An exit is never a pleasant process — someone who has been doing well suddenly has to leave after six months. Lei Jun's approach has three key points.
Align Values First
Most importantly, establish a shared language: what kind of thing are we building, and what logic guides it. With this "axiom system," discussion is easy and real disputes are few. This logic must hold for everyone: even if he goes and starts a new company, the same rules apply.
Equity Represents Future Contribution
Giving you 10% or 20% equity is based on your contribution to the company over the next three, five, or ten years — not on the fact that you put in a few thousand dollars to register the company with me. Today's startups are won by brains. You only worked for six months; I still need to find someone to fill that gap — where does their equity come from? If you don't release it, how do I give it?
Use a Third-Party Messenger
An experienced angel investor is emotionally detached and speaks the axioms of the entire startup market. Having them say "this is my requirement" is much easier to negotiate than the founder saying it directly, because it's logically sound — anyone serious about startups understands this.
Among the companies Lei Jun has invested in, about one in three has had co-founder incompatibility and a co-founder change. That's not a low probability. So an exit mechanism isn't a "just in case" provision — it's a clause you're likely to use. Keep clear accounts even between close partners; negotiate the exit mechanism before you start. Avoiding the conversation out of awkwardness ultimately damages your business.
A solo company still has co-founding problems — just under a different name: revenue sharing. Co-building an AI product with a friend, agreeing "70/30 split after launch" with a designer, negotiating a joint promotion with a blogger — these are all scaled-down versions of the co-founder problem.
About one in three of these will also break up. Those who didn't discuss exit terms beforehand will fight it out when the split happens.
Scale down Lei Jun's approach: before starting, write down three things on one page.
- Exit calculation: if someone exits halfway, how is the completed portion valued.
- Ownership of outputs: who owns the code, assets, and accounts.
- Revenue split rules: when counting starts, and that full payment requires completing the entire cycle — this is your "four-year lock-up," just with a cycle that might be six months.
When the split happens, find a third party both sides respect to deliver the message — don't negotiate it red-faced yourself. This one page is easiest to write when the relationship is at its best.
Don't reverse the sequence: share the vision first, then reveal the risks honestly (otherwise you're just misleading them).
Then discuss roles, contributions, and equity split: finally align expectations — "once you align, it usually clicks."
Lock all co-founder equity for four years: negotiate the exit mechanism before starting — keep clear accounts even between close partners.
Say the hard things upfront: the clause you can't bring yourself to raise is often the most expensive trap down the road.
Source: compiled from Lei Jun's public entrepreneurship lectures