“How entrepreneurs negotiate the division of shares in a start-up company between themselves, can increase or decrease their company’s value down the track,” says Melbourne Business School visiting professor of entrepreneurship Thomas Hellmann.

He estimates that the value at stake is approximately 10% of the firm equity, 25% of the average founder stake or $450,000 in net present value.

Professor Hellmann’s research on high technology start-up companies shows that if founders quickly agree to an equal split of company shares, their company will be worth less, than if they spent more time negotiating this division of shares.

“How shares are divided between founding members really matters,” Professor Hellmann says.

“A third of all start-up companies surveyed by this research split shares equally between founders. Almost half of these founders spent less than one day negotiating this equity split.”

He stresses that the most interesting finding is not that these companies automatically get lower company valuations. It’s that if founders fail to drive a tough bargain when negotiating their share of a start up company, or if they quickly agree to an equal split of company shares to save conflict, their new venture will later be valued less than it could have been.”

“We found that one of the main reasons entrepreneurs decide to split a new company’s shares equally between themselves is to avoid conflict,” he says.

“My advice is to face up to that conflict early on. Do your homework on what each founding member can contribute to the venture and divide the shares accordingly.”

Professor Hellmann also advises considering the use of a founder vesting scheme — a dynamic contract which distributes shares further down the track based on performance milestones.

He says, “Quite frankly there is no recipe for how to do this, but research clearly shows that if it is done, it will increase the company’s value by up to 10%.”

“If you do go through this more complex process and at the end agree we really do want to split shares equally, then your company valuation will not suffer a 10% discount. It is only the people who spend less than a day making this decision who jeopardise their company valuation.

“Other research shows that people who split shares equally are more likely to have team blow-ups, where either the entire team falls apart or where individual founders leave. Larger or diverse teams and teams that have apparent differences between founders are less likely to split equity equally. Family teams are more likely.”

Age differences don’t seem to affect whether or not you get a greater share holding, but if you are a serial entrepreneur who has started other companies, you will tend to get an 8% greater shareholding.

This data is based on research which surveyed 511 high technology start up companies over five years.