Equity in deep tech startups: Balancing vision, contribution, and growth

May 22, 2025

In the world of deep tech startups, equity distribution isn’t just a financial decision, it’s a blueprint for how innovation, leadership, and long-term commitment come together. This becomes especially critical when the company is founded by a single individual with core intellectual property (IP) and later expanded through the involvement of a CEO, CTO, and additional team members.

The nature of deep tech: Why equity matters more

Unlike software startups where speed and market entry often take precedence, deep tech companies are typically:

IP-heavy, with substantial R&D,
Long-horizon in terms of revenue realization,
Heavily reliant on academic, scientific, or engineering breakthroughs.

In such companies, the founding IP isn’t just an idea, it is the company. The original IP holder is often the one who conceptualized the technology, secured early public funding or grants, and took the initial risk without external capital. That foundational effort must be respected in the equity structure.

A typical starting point: Solo IP holder

If you’re the IP holder and founder, and you’ve launched the company alone, your initial equity position should reflect that. It’s not uncommon to start with:

Founder holding 90–100% (especially pre-incorporation or early pre-seed stage)
Then set aside an equity pool (~10–20%) for future hires and advisors.

Bringing in a CTO or CEO: How to think about equity

As you bring others on board, especially a CTO who can develop the technology, and a CEO to scale and secure funding, equity becomes a way to compensate for risk and align long-term commitment. Here’s a general guideline based on industry standards:

Role	Equity (via options or direct)	Notes
Non-founder CEO	5–10%	Typically through a 4-year vesting schedule with a 1-year cliff. Higher if very early stage, lower if post-Series A.
CTO (non-founder)	1–5%	Depends on technical leadership and stage of entry. Can go higher if they’re central to product execution.
Other early key hires	0.5–2%	For core contributors (first 5–10 employees).

Note: If someone is asking for 40–50% equity without being a founder or contributing substantial capital/IP, that’s a red flag, especially in deep tech.

Founder equity: What’s reasonable?

In deep tech startups, it’s common for the original IP holder to retain majority equity (>50%) through the seed and early Series A stages especially if they continue to contribute technical guidance, maintain scientific credibility, or are central to the company’s long-term vision. A common structure post-initial team setup might look like:

Founder/IP holder: 60–70%
CTO: 3–5%
CEO: 5–10%
ESOP (Employee Pool): 10–15%
Early investors (post-seed): 10–20% depending on stage

These figures adjust as more capital is raised, but initial equity must reward early risk and invention.

Mistakes to avoid

Over-equity to early hires: Giving away too much to non-founders can destabilize governance and hurt future fundraising.
Confusing title with ownership: CEO is a role, not a rank of ownership. Equity should reflect risk, contribution, and long-term commitment, not just job title.
Underestimating IP value: Especially in deep tech, the IP isn’t a “starting point”, it’s a moat, a product, and an asset.

Final thoughts

Deep tech startups are complex. Their success depends on honoring the science and those who created it, while also bringing in operational leadership that can commercialize and scale. Equity is a tool to align those forces—not a reward to be distributed based on negotiation power alone. When building your startup, set expectations early, benchmark against industry norms, and always prioritize long-term alignment over short-term appeasement.

“In deep tech startups, equity should reflect contribution, not just position. Founders who bring the core IP must retain strategic control, while operational leaders are best incentivized through structured equity aligned with industry standards.”