Startup Professionals Musings

JANUARY 15, 2021

When an entrepreneur first incorporates a business, they may find themselves the proud owner of 10 million shares of common stock, commonly called founder’s shares. Make sure the government waits for a stock sale to collect taxes. Spread stock issuance over an earning period. Key founder vesting should have no cliff.

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Vesting Dilution Stock Founder Vesting 298

SoCal CTO

SEPTEMBER 27, 2011

Paul Graham provides what is roughly the core formula for equity at any point in The Equity Equation : You can use the same formula when giving stock to employees, but it works in the other direction. Unlike the founders, the employees have to wait until their grants vest, working at a company no longer of their choosing for two years.

Early Stage 391

Early Stage Equity CTO Hire Sweat Equity 391

Startup Professionals Musings

MARCH 23, 2014

In reality, so-called “Founder’s” shares are simply common stock, issued at the time of startup incorporation, for a very low price, and normally allocated to the multiple initial players commensurate with their investment or role. These shares are allocated and committed, but not really issued and owned (vested) until later.

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Stock Vesting Common Stock Founder Vesting 256

Eric Friedman

NOVEMBER 18, 2022

An underutilized action by founders is canceling their vesting due to lack of interaction or help with your company. Lean on the questions and comments here as a way to provide a framework for the conversation, a guide for equity and vesting, and a place you can both reference. How does vesting equity with an advisor work?

Early Stage 103

Early Stage Equity Vesting Cap Table 103

YoungUpstarts

AUGUST 19, 2019

When you hear about investments, stocks, trading, bulls and bears, you might feel a bit intimidated, even confused. The stock market has historically been a long-term source of wealth creation, but due to a widening wealth gap, has become largely inaccessible to young people. by Thomas Beattie, CEO of Voleo. It’s understandable.

Investment Bankers 147

Investment Bankers Technical Review Stock Vesting 147

The Startup Toolkit

FEBRUARY 15, 2013

false As a cheatsheet, the “normal” equity structure is: Founder terms: 4 year vesting, 1 year cliff, for everyone, including you. 2.0% ) : 4 year vesting, optional cliff, full acceleration on exit. When it comes to equity terms, there are only 3 things to understand: vesting, cliffs, and acceleration. Cliffs & vesting.

Vesting 56

Vesting Equity Cofounder Technical Review 56

Startup Professionals Musings

JANUARY 29, 2018

I’ll never forget that great sense of excitement I felt when I incorporated my first business, and realized that I was now the proud owner of 10 million shares of common stock. Even though initial stock has no market value today, it is extremely valuable in dividing equity ownership between co-founders, investors, and early partners.

Stock 129

Stock Vesting Preferred Stock Cofounder 129

Steve Blank

APRIL 10, 2019

For most startup employee’s startup stock options are now a bad deal. Why Startups Offer Stock Options. In tech startups stock options were here almost from the beginning, first offered to the founders in 1957 at Fairchild Semiconductor , the first chip startup in Silicon Valley. Not everyone got the same amount of stock.

Stock Options 333

Stock Options Stock Vesting Common Stock 333

Startup Professionals Musings

JULY 1, 2022

By the way, you will normally only be offered “options,” which vest over a 4-year period after a 1-year “cliff.” Many employees forget that there isn’t even a market for startup stock, until after the company has gone public, which hasn’t happened positively to many companies in the last few years. 7% Product Manager,2 -.3%

Stock Options 343

Stock Options Advisory Board Stock Startup 343

YoungUpstarts

SEPTEMBER 27, 2017

In today’s start-up culture, it’s common for companies to offer employees the opportunity to own stock in the business. While most folks know the basic benefits of receiving stock, many employees are taken off guard by the tax implications that follow. Incentive Stock Option (ISO). Non-Qualified Stock Option (NQSO).

Stock Options 124

Stock Options Stock Capital Gains Vesting 124

Startup Professionals Musings

SEPTEMBER 10, 2018

Even with an agreed initial equity split, it’s smart to have Founder’s stock actually issue or vest over a period of at least two years, on a month-by-month basis. Obviously it should be amended later, as roles are more clearly defined, and execution proceeds.

Equity 238

Equity Cofounder Technical Cofounder Intellectual Property 238

Gust

MARCH 16, 2014

In reality, so-called “Founder’s” shares are simply common stock, issued at the time of startup incorporation, for a very low price, and normally allocated to the multiple initial players commensurate with their investment or role. These shares are allocated and committed, but not really issued and owned (vested) until later.

Stock 175

Stock Vesting Common Stock Founder Vesting 175

Startup Professionals Musings

MAY 18, 2015

When an entrepreneur first incorporates his or her business, he or she may find him or herself the proud owner of 10 million shares of common stock, commonly called founder’s shares. Make sure the government waits for a stock sale to collect taxes. Spread stock issuance over an earning period. In the U.S.,

Stock 120

Stock Vesting Common Stock Founder Vesting 120

Startup Professionals Musings

OCTOBER 17, 2013

By the way, you will normally only be offered “options,” which vest over a 4-year period after a 1-year “cliff.” Many employees forget that there isn’t even a market for stock, until after the company has gone public, which hasn’t happened positively to many companies in the last few years. 7% Product Manager,2 -.3% It’s a huge gamble.

Stock Options 224

Stock Options Stock Advisory Board Startup 224

Startup Professionals Musings

OCTOBER 21, 2017

By the way, you will normally only be offered “options,” which vest over a 4-year period after a 1-year “cliff.” Many employees forget that there isn’t even a market for startup stock, until after the company has gone public, which hasn’t happened positively to many companies in the last few years. 7% Product Manager,2 -.3%

Stock 140

Stock Stock Options Advisory Board Startup 140

Startup Professionals Musings

OCTOBER 7, 2010

In reality, so-called “founder’s” shares are simply common stock, issued at the time of startup incorporation, for a very low price, and normally allocated to the multiple initial players commensurate with their investment or role. These shares are allocated and committed, but not really issued and owned (vested) until later.

Stock 214

Stock Vesting Common Stock Founder Vesting 214

Startup Professionals Musings

SEPTEMBER 22, 2012

By the way, you will normally only be offered “options,” which vest over a 4-year period after a 1-year “cliff.” Many employees forget that there isn’t even a market for stock, until after the company has gone public, which hasn’t happened positively to many companies in the last few years. 7% Product Manager,2 -.3%

Stock Options 230

Stock Options Stock Advisory Board Startup 230

SoCal CTO

NOVEMBER 1, 2010

Think Again How to hire a programmer to make your ideas happen How Much Stock to Ask For When Joining a Startup - Startup Professionals Musings , June 20, 2010 Guide to Evaluating Startup Ideas - Tony Wright dot com , May 27, 2010 Eight Tips To Successfully Bootstrap Your Business Should Founders Be Allowed to Take Money off the Table?

Technical Cofounder 241

Technical Cofounder CTO Hire Equity Sweat Equity 241

Both Sides of the Table

AUGUST 15, 2012

You’ll have a peer relationship with another CEO that you have a vested interest in that crosses over to a board – CEO relationship. . Side note: Image is of “team awe.sm” – it seemed a better image than any of the cheesy stock photos of a boardroom. You’ll understand “fiduciary responsibility” more deeply. .

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Founder Vesting Startup Stock 294

Feld Thoughts

SEPTEMBER 2, 2011

The founders each have common shares that will vest over four years. The vesting schedule protects each of the co-founders in case one gets hit by a bus or decides to drop the project after a short period of time. They come up with two options: Hire Praveena as an employee and offer her stock options.

Cap Table 133

Cap Table CTO Hire Technical Cofounder Cofounder 133

Scott Edward Walker

SEPTEMBER 28, 2011

Vesting Restrictions. The first deadly mistake relates to vesting restrictions. In addition, sometimes a portion of the shares will be deemed to be vested “up front” – meaning that they are not subject to vesting — particularly where a founder has made a significant contribution prior to the company’s incorporation.

Vesting 89

Vesting Software Review IP Intellectual Property 89

Up and Running

DECEMBER 1, 2015

At the time, Facebook wasn’t the goliath it is today and so, Choe was given a couple of options: he could have $60,000 in cash, or stock (equal to the equivalent amount of the cash back then). If however you are giving a “normal employee” an incentive stock option plan (more on that later), that’s entirely different.

Equity 60

Equity Employee Stock Options Vesting 60

VC Adventure

AUGUST 16, 2020

More complicated than I want to dive into here, but it would actually benefit employees and also the federal coffers as the tax would get paid on greater gains when the stock is eventually sold. My background thesis inherent in this is that employees with options should continue to vest new option as they continue to work for your business.

Programming 149

Programming Vesting Equity Software Review 149

Board Effect

OCTOBER 19, 2020

A conflict of interest exists when a board member, officer, staff member, or volunteer has a vested interest in money, status, relationships, or reputation that has the potential to compromise their actions, judgment, or decision-making. A conflict occurs when you have a vested interest (i.e.

Vesting 98

Vesting Intellectual Property Reputation Technical Review 98

Startup Professionals Musings

MARCH 29, 2015

By the way, you will normally only be offered “options,” which vest over a 4-year period after a 1-year “cliff.” Many employees forget that there isn’t even a market for startup stock, until after the company has gone public, which hasn’t happened positively to many companies in the last few years. 7% Product Manager,2 -.3%

Stock Options 120

Stock Options Stock Advisory Board Startup 120

Feld Thoughts

JANUARY 17, 2013

I’ve never really understood why the majority of stock option refresh grants are stacked grants mid-way through the granting process. Assume you hire someone and grant them 10,000 options with monthly vesting of four years with a one year cliff. Let me give an example. options / month, or 2,500 / year.)

Stock Options 134

Stock Options Stock Vesting Retention 134

Startup Professionals Musings

JANUARY 22, 2013

In reality, so-called “founder’s” shares are simply common stock, issued at the time of startup incorporation, for a very low price, and normally allocated to the multiple initial players commensurate with their investment or role. These shares are allocated and committed, but not really issued and owned (vested) until later.

Vesting 245

Vesting Common Stock Stock Founder Vesting 245

Startup Professionals Musings

SEPTEMBER 25, 2019

By the way, you will normally only be offered “options,” which vest over a 4-year period after a 1-year “cliff.” Many employees forget that there isn’t even a market for startup stock, until after the company has gone public, which hasn’t happened positively to many companies in the last few years. 7% Product Manager,2 -.3%

Equity 237

Equity Stock Options Advisory Board Stock 237

Startup Professionals Musings

AUGUST 24, 2016

Even with an agreed initial equity split, it’s smart to have Founder’s stock actually issue or vest over a period of at least two years, on a month-by-month basis. Obviously it should be amended later, as roles are more clearly defined, and execution proceeds.

Equity 120

Equity Cofounder Technical Cofounder Intellectual Property 120

Startup Professionals Musings

APRIL 11, 2021

This problem can be avoided by incorporating immediately after early discussions, and issuing shares to the Founders, with normal vesting and other participation rules. Trouble with the IRS over Founders stock value. Many startups delay incorporation until the first formal round of financing, which is too late.

Cost 363

Cost Non-Compete Accredited Investor Cofounder 363

Startup Professionals Musings

APRIL 10, 2016

Calculate employee stock option values and vesting times, as well as salary. Since nine out of ten startups fail completely, serious investors look for a 10X return on their investment within five years. Look for examples of similar companies and revenue multiples achieved from acquirers.

Sweat Equity 120

Sweat Equity Burn Rate Technical Review Intellectual Property 120

Startup Professionals Musings

MAY 8, 2022

Giving equity is realistic, but base it on contribution and role, with vesting after time and milestones. Offer low cash early, with bonuses or stock options for milestones, to people in your personal network. You have very little money, and you don’t want to give away your equity. Recognize that the best people don’t work for free.

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Founder Hockey Stick Cofounder Liquidity Event 325

SoCal CTO

JANUARY 18, 2011

Having a successful negotiation where you get a reasonable equity position with vesting over four years and a salary going forward only to find yourself working at a place you don’t want to be is probably not a great result? But, you should probably start with understanding where they believe that prior verbal agreement stands.

CTO 167

CTO CTO Hire Equity Vesting 167

Steve Blank

MAY 19, 2015

I got answers that sounded like the Tom’s – new stock grants for the executive staff, great new building, and oh, by the way, Tom and his co-founder got to sell some stock in the new round. Aren’t you concerned about losing qualified people that the company spent the last few years training but never compensated adequately?”

Technical Review 120

Technical Review Salary Early Stage Software Review 120

Scott Edward Walker

DECEMBER 14, 2015

One of the biggest mistakes I see startups make is failing to set-up vesting schedules for the founders. v=-R01YcgJ3Yw What Is a Vesting Schedule? A vesting schedule is a mechanism by which the ownership of the stock issued to the founders is earned over time (typically four years, as discussed below), rather than immediately.

Vesting 40

Vesting Founder Stock Cofounder 40

SoCal CTO

JANUARY 18, 2011

Having a successful negotiation where you get a reasonable equity position with vesting over four years and a salary going forward only to find yourself working at a place you don’t want to be is probably not a great result? But, you should probably start with understanding where they believe that prior verbal agreement stands.

CTO 150

CTO CTO Hire Equity Vesting 150

Mike Michalowicz

JULY 26, 2017

This will also encourage them to come forward with their own ideas on how to tackle projects because of their vested interest. . Instead of using them, they can bring them back to headquarters where you can stock up and then deliver the goods to a shelter. The project doesn’t have to rely solely on donating money. Referral program.

Software Review 106

Software Review Vesting Retention Community 106