When a cofounder leaves a startup early, what happens to their equity depends almost entirely on one thing: whether the founders agreed vesting and leaver terms in advance.
With vesting in place
If vesting was agreed, the departing founder keeps only the equity they have earned up to their departure date. The unvested remainder returns to the company or the other founders. A founder who leaves at eighteen months on a four-year schedule keeps roughly 37.5% of their intended stake and forfeits the rest.
Without vesting in place
If there was no vesting, the departing founder typically keeps their entire equity stake, regardless of how little they contributed. This is the single most damaging governance gap in early startups: a founder who leaves after a few months can hold a large, permanent slice of a company they no longer build.
The time to decide what happens when a founder leaves is before anyone wants to.
Good leaver and bad leaver
Many agreements distinguish between a good leaver (someone who leaves for legitimate reasons such as illness) and a bad leaver (someone who is dismissed for cause or breaches the agreement). The two are often treated differently in how much equity they retain. Defining these terms in advance avoids a painful argument at the worst possible moment.