What Is the 50/100/500 Rule for Startups?

  • Startup

The 50/100/500 rule is a framework for structuring equity during early fundraising. Roughly: the founder keeps 50% of equity; the first 100 employees share about 20-30%; and early investors (angels; seed VCs) take the remaining 20-30%. These percentages aren’t rigid—they’re guidelines to prevent excessive dilution of founder control while leaving room for future hiring and investment. The exact split depends on your situation; investor requirements; and employee compensation strategy. Consult with a startup attorney when structuring equity.

R&D Offer Quiz

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Answer to find out if you're eligible for R&D tax credits.

Do the activities performed relate to a new or improved business component’s function, performance, reliability, quality, or composition?(Required)
For Example: A mid-sized packaging company develops a slightly modified cardboard box design to improve its stacking strength (reliability) for warehouse storage, involving minor adjustments to the corrugation pattern to reduce collapse under standard weight loads.
Is your company trying to discover information to eliminate uncertainty concerning the capability or method for developing or improving a business component?(Required)
For Example: A furniture manufacturer investigates whether a cheaper wood adhesive can hold joints as effectively as the current one during assembly, testing bond strength to resolve doubts about its capability in standard production lines.
Do the activities performed constitute a process of experimentation?(Required)
For Example: An auto parts supplier runs a series of bench tests on different lubricant formulations to find one that reduces friction in engine bearings more effectively, systematically comparing wear rates over simulated operating cycles.