In 2000, Robin Chase and Antje Danielson co-founded Zipcar, the car-sharing company that put its first rentable-by-the-hour cars on the road around Boston that June. The two women split the young company's equity roughly evenly at the start, by most accounts close to 50/50.
The equal split did not settle who controlled the company, or what would happen if the two disagreed. Within a year, they did. In January 2001, Danielson was fired, after Chase petitioned Zipcar's board for the authority to make hiring and firing decisions without consulting it first.
Chase's own position did not stay secure either. As Zipcar raised round after round of funding, typical for a capital-intensive business buying and maintaining a fleet of cars, her ownership was diluted the way any founder's is when a company issues new shares to new investors: each round made the company bigger and each founder's slice of it smaller. A detailed reconstruction of Zipcar's cap table puts Chase's stake at roughly half the company at founding, around 30% after its first funding round, into the single digits after a difficult, lower-valuation round in 2002, and down to roughly one to a few percent by the time Zipcar went public in 2011. Sources differ on the exact percentage at each stage; the direction and the scale of the dilution are consistent across all of them. In February 2003, with the company still struggling to raise its next round, the board replaced Chase as CEO with Scott Griffith.
Zipcar listed on Nasdaq in April 2011. Less than two years later, Avis Budget Group agreed to acquire the company for approximately $500 million, a deal announced in January 2013 and completed that March. By then, neither Chase's nor Danielson's stake, each having started at roughly half the company, amounted to a meaningful share of the sale price.
What founders can learn from this
Zipcar's story is a different failure mode than a fight over who owned the idea. Chase and Danielson had a split. What they didn't have was any protection for that split, or for their roles, as the company grew. An even division of equity on day one says nothing about what happens when the company needs to raise five, six, seven rounds of capital, or about who gets to decide, unilaterally, that a cofounder should be let go. How should cofounders split equity covers why the number itself matters less than the terms behind it. What is dilution is the plain-language version of what happened to both founders' stakes as new investors came in, round after round, exactly as it should for a capital-intensive business, but exactly as painful when nobody had planned for what a heavily diluted stake would still be worth to them.
The sharper lesson is about decision rights. A board process removed one cofounder in the company's first year, and removed the other from the CEO seat two years later, entirely within the rules, once outside investors held the votes. None of that is unusual for a venture-backed company. What made it land harder here is that neither founder appears to have negotiated, at the very start while the two of them still held all the leverage, any explicit terms for how a cofounder could be removed, or what would happen to their stake if they were. What should a founder agreement include is exactly the conversation to have before the first outside dollar comes in, while an equal split is still a choice you're making together, not a number you're stuck defending later.
Sources: Inc. Magazine, CNBC, Wikipedia, Reaction Wheel (Zipcar cap table analysis).