Trending Sources

Rethinking Founder Vesting

K9 Ventures

One of these norms is how founder vesting and employee vesting works. I won’t get into employee vesting today as that has much more to consider than I have time to cover in this short post today. Here is a good summary post from Cooley GO on Founder Vesting. There are two main reasons for founder vesting: To ensure founders stick around and build the company. If that’s the case, then why isn’t founder vesting spread out over a much longer period of time?

6-year vesting

Venture Hacks

Every team member of AngelList is on a 6-year vesting schedule. Everyone asks whether they get more equity to make up for the longer vesting schedule. If you’re interested in a 6-year vesting schedule, AngelList is hiring engineers and designers. Including the founders. Because it takes a long time to build something important. And we want everyone to stick around for a long time. Because we want people who are here for the mission , not a payday.

Equity basics: vesting, cliffs, acceleration, and exits

The Startup Toolkit

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. Cliffs & vesting. Vesting is how we fix that.

Founder Agreements – Vesting, Vesting and more Vesting

High Contrast

To paraphrase the famous line from The Graduate “I have one word for you “vesting.’”. Sim has a lot of great things to say about vesting, but here is my take on it: Every member of the team should be subject to vesting. Immediate vesting is a bad idea.

The best vesting schedule

High Contrast

There is no such thing as the best or optimal vesting schedule in a startup. That doesn’t mean current vesting schedules are really good but it does mean that many of the so-called best alternatives are not much better. Still, if we are to talk about “the best vesting schedule,&# I can’t imagine anything better than a hindsight test. Did the vesting schedule in a startup help or hurt returns for various types of equity holders? Standard vesting.

Optimum Share and Option Vesting

Angel Blog

I believe vesting is the most important element of corporate structure. Vesting has incredibly powerful effects on the group psychology, culture and corporate performance. I have seen many companies literally fail due to flaws in their vesting. Even though there is now reasonable agreement on the ideal magnitudes of equity ownership, there is still discussion on the optimum vesting formula. All vesting for senior employees accelerates on a sale of the Company.

A Different Approach to Refreshing Stock Option Grants

Feld Thoughts

Assume you hire someone and grant them 10,000 options with monthly vesting of four years with a one year cliff. That means that after one year, they get 25% of their options and then start vesting the remaining options monthly at a rate of 1/48 (208.3 On day 1 of year 3, the person has vested 50% of their options, or 5,000 of them and still has 5,000 left to vest. You just changed their first four year vesting package from 10,000 options to 11,250 options (2,812.5

Curator: Amazon Culture Shock, Work Wisdom, Vesting Schedules, Email Snooze

YFS Magazine

Here’s our weekly link roundup of small business buzz, musings and muchness. A curation of the best small business talk around the web. News curator small business news

Legal Basics: Vesting

VC Ready Blog

Vesting” occurs when the restrictions lapse and the equity goes from “unvested” to “vested” (i.e. Most of the time, the restrictions provide that the recipient forfeits the equity if the conditions to vesting are not satisfied. Time-based vesting usually occurs over one to five years, with four years being the most common vesting period for rank-and-file employees of tech companies.

Checklist For Launching A Startup

Ask The VC

It’s summarized at If I Launched A Startup and includes stuff on incorporation, founders stock, vesting, NDAs, and some other useful things. Company Creation incorporation launch nda vestingI ran across a dynamite set of posts for anyone launching a startup. If you are launching a startup, go check it out.

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Section 83 and Stock Subject To Vesting

Recent Buzzes - VC Experts, Inc.

Section 83(a) of the Internal Revenue Code states that if "property" is issued " in connection with the performance of services," the difference between the "fair value" of, and the amount paid by the recipient for, the property–usually stock– is taxable to the recipient (and deductible by the corporation) as additional compensation

Startup founders: Here’s why vesting is your best friend

The Next Web

This is why vesting is so important. Investing in vesting. In essence, vesting protects founders from each other and aligns incentives so everybody focuses towards a common goal: building a successful company.

“A man will be able to carry one in his vest pocket”

Chris Dixon

A man will be able to carry one in his vest pocket. Nikola Tesla predicted the development internet-connected smartphones back in 1926: From the inception of the wireless system, I saw that this new art of applied electricity would be of greater benefit to the human race than any other scientific discovery, for it virtually eliminates distance.

Change of Control Vesting Acceleration

ithacaVC

I am a big fan of change of control option vesting acceleration, particularly for the executive team. Normally employee options vest over 4 years, with 25% vesting after year 1 and then the balance pro rata (monthly or quarterly) over the remaining 3 years. So, personally, I like vesting acceleration on a change of control for the executive team. I am probably not in the majority of VCs on this topic. Quick background: 1.

How to Protect Your Startup Founder’s Shares

Startup Professionals Musings

These shares are allocated and committed, but not really issued and owned (vested) until later. Vesting always stops when an employee leaves the company. Vesting with no cliff. Accelerated vesting conditions.

Legal Checklist for Startups

Scott Edward Walker

Set-up vesting schedules for the founders (see post here ) and file 83(b) elections with the IRS (see #3 here ). Startup Issues 409A 83(b) election accredited investors checklist for startups corporate lawyer equity IP ownership legal checklist legal fees stock options vesting schedules

The “I-just-got-bought-by-a-big-company” survival guide

Scott Weiss

So here was the big dilemma: I had signed up for 24 months of re-vesting my founder’s shares that wouldn’t begin until the deal was closed and it already seemed like a paint-drying eternity. This is especially true if the leader isn’t planning on staying around after the vesting period. In today’s world, 18-month stints are the norm at well-run large companies so there’s no need to feel bad leaving at the end of your vesting period.

First Round Funding Terms and Founder Vesting

Both Sides of the Table

This is part of my ongoing series “Pitching a VC“ There’s a great meme developing this morning on the need to simplify funding terms and documents. The meme was kicked off by Chris Dixon with this post saying that term sheets need to be simplified and align investor / founder interests. That prompted Fred Wilson’s blog [.].

The Importance of Vesting Schedules – Part 2

Scott Edward Walker

“I didn’t even know what a vesting schedule was… [and] that mistake probably cost me billions of dollars.” Indeed, the failure to set-up vesting schedules is now the most common mistake I see startups make. This is exactly what would happen without vesting schedules.

Avoid the 50/50 co-founder model - here's why

joel.is

Even with vesting (which I highly recommend), you are making a big commitment which will still be a hassle if it doesn’t work out. cofounder 50/50 startup vesting partnership

First Round Funding Terms and Founder Vesting

Both Sides of the Table

One very important item from Chris’s original post that wasn’t picked up by Fred or Brad is founder vesting. Chris writes that early-stage deals should have: Founder vesting w/ acceleration on change of control. In my first company there was no vesting in the seed round.

How To Launch a Startup and Avoid Ending-up in Jail

Scott Edward Walker

Not only are there key contractual issues that must be buttoned-down (like vesting and IP assignment ), but also there is a minefield of laws and regulations that must be complied with. Introduction I love working with startups – and trying to protect founders and watch their backs.

What is the best way to divide up ownership in a startup?

Grasshopper Herder

Finding Co-Founders Investment co-founders equity vesting scheduleWhen considering this issue, many people will focus on incentivizing the founders as well as issues of equality and equity. I would recommend a deep understanding how roles and responsibilities will be divided prior to discussing the equity split.

Is Dead Equity Crippling Your Company?

Altgate

They fail to include vesting terms (i.e., It is more common that startups include vesting terms for their non-founding hires. However, those vesting periods often underestimate the time horizon over which key hires should be adding value to the startup.

8 Ways To Maximize The Value Of Your Startup Stock

Startup Professionals Musings

This is the purpose of a vesting schedule, which issues allocated stock over time. Typically, vesting in startups occurs monthly over four years, starting with the first 25 percent of shares vesting only after an owner has remained active for at least 12 months (one year cliff ).

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Ten rules for better founding teams

High Contrast

Vesting. With the exceptions of the investor and certain types of advisor roles as discussed in my previous post , everyone else on the founding team should vest. Here are my thoughts on the best vesting schedule for founders.). Consider a vesting cliff. Standard founder agreements don’t have vesting cliffs for founders. Align vesting with value-add. Typical founder vesting schedules are time-based.

Founder’s Stock Is Gold, If You Know The Rules

Startup Professionals Musings

These shares are allocated and committed, but not really issued and owned (vested) until later. Vesting always stops when an employee leaves the company. Vesting with no cliff. Accelerated vesting conditions.

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4 Deadly Legal Mistakes That Startups Make

Scott Edward Walker

Vesting Restrictions. The first deadly mistake relates to vesting restrictions. Startup Issues 83(b) election Ask the Attorney founder vesting intellectual property IP stock purchase agreement VentureBeat vesting restrictions Winklevoss twins

Anonymous donor helps provide bulletproof vests for deputies

Winston-Salem Journal State/Region News

Share and option vesting

Angel Blog

Even though there is reasonable agreement on the optimum magnitudes of equity ownership, there is still discussion on the optimum vesting formula Widespread employee ownership is still a relatively new concept. Even as recently as the 1980's, there was still debate on the degree to which employee equity ownership affected share price. Today, it is widely accepted in North America that companies with broad employee ownership create larger, and more rapid, increases in shareholder value.

FBI: Tennessee shooter was wearing vest that allowed him to carry extra gun ammunition

Winston-Salem Journal State/Region News

AP) — FBI: Tennessee shooter was wearing vest that allowed him to carry extra gun ammunition CHATTANOOGA, Tenn. (AP)

How Often Do Employees Of VC-backed Startups Get Stock Options?

Ask The VC

Employees should expect these grants to vest over time (usually four years) and have a one year cliff (which means the person has to be employed for a year to have any of the options vest.). Question: How often do venture-backed start-up employees (let’s say non-executives) get stock option grants? Besides the initial grant when they start, how often do “re-up” grants come? Should they be expected after further funding rounds?

China Vesting Issues Update on China Direct Industries, Inc.

EIN News

China Vesting researches 500 of the top U.S. to Chinese public companies listed in the United States, today announced that is has issued an. Listed Chinese Public Companies and tracks the. network consists of Chinese officials, investment bankers, venture capitalists, scholars, academics and most importantly entrepreneurs that

Is Dead Equity Crippling Your Company?

Noam Wasserman

They fail to include vesting terms (i.e., It is more common that startups include vesting terms for their non-founding hires. However, those vesting periods often underestimate the time horizon over which key hires should be adding value to the startup.

Founder’s Stock Is Gold, If You Know The Rules

Gust

These shares are allocated and committed, but not really issued and owned (vested) until later. Vesting always stops when an employee leaves the company. Vesting with no cliff. Accelerated vesting conditions. Image via Flickr by BullionVault.

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AngelList new employee reading list

Venture Hacks

6-year vesting. I do the onboarding for all new AngelList team members. Part of it is asking them to read the following (many candidates have read these before they even come in for an interview). Culture. Startups are here to save the world. Things we care about at AngelList. Doing the wrong things the right way. Execution. Ask forgiveness, not permission. 1-man startups. No email at AngelList. Customer service. Internal 360 Review (redacted). Company Strategy (you wish).

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If I Launched a Startup

The Startup Lawyer

8) Vest Founders Shares?: 9) Vesting Schedule for Founders Shares: 4 years with a One Year Cliff. (10) Here’s what I’d do in the beginning: Incorporation. (1) 1) Entity Choice: Corporation or Corporation. (2) 2) State of Incorporation: Delaware. (3) 3) Authorized Shares in Charter: 10,000,000 Shares. (4) 4) Type of Shares: Common Stock. (5) 5) Par Value of Common: $0.0001. (6) 6) Initial Founders Issuance: 8,000,000 Shares. (7)

NDA 47

Robots in the Spotlight at Rackspace

SiliconHills

By LAURA LOREK Founder of Silicon Hills News Coaches in wizard’s hats, kids in bunny ears, others donning purple and yellow vests made out of duct tape.

Wenger: Presenting Option Grants to Boards

Ask The VC

Special vesting considerations that differ from the plan. For refresh grants: how many options does the employee already have and how far are those vested? Today’s VC post of the day is from Albert Wenger (USV) and titled Presenting Option Grants to Boards. This is feedback I give to CEOs 98% of the time after my first board meeting. While there is no standard for how to present option grants, Albert lays out a very clear set of eight pieces of data he likes to see.

Anatomy of a Term Sheet: Vesting of Founders’ Stock

VC Ready Blog

Investors often want at least a portion of the stock owned by each founder of a company to be subject to vesting and a corresponding company buyback right if the founder ceases to be employed by the company within a certain period of time after a financing (the “vesting period”). The purpose of the buyback is to incentivize the founder to continue working for the company until the end of the vesting period (when a new equity incentive grant is usually made).