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?

Voting Rights of Vesting Shares

The Startup Lawyer

One of the most asked questions I receive when setting up new startup companies is “Do my vesting shares have any voting rights?” ” Or in other words, does a stockholder only get to vote based on their amount of vested shares?

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.

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

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.

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 for the Founders

Scott Edward Walker

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? Why Do You Need Vesting Schedules? What Is the Typical Vesting Schedule? Where Is the Vesting Schedule Addressed?

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.

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.

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.

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

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.

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.

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

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

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.

Entreprenuer Network

SoCal CTO

skip to main | skip to sidebar SoCal CTO Thursday, March 1, 2007 Entreprenuer Network Great post by Ben Kuo - The Importance of the “Network&# to Entrepreneurs - the informal connections between people in the technology industry here who have a vested interest in helping entrepreneurs take their companies to the next level.

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.

Beyond Policy

OnlyOnce

When you fire an employee immediately before a major block of stock options vest, what’s the right thing to do? Vest the options. Business Culture Human Resources Leadership Management Return Path car service payroll vestingBeyond Policy. Policies are an important part of managing employees. Similarly, contracts are an important part of running the commercial side of the business.

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.

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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How do you pay an early stage board?

Berkonomics

Give one percent equity to each outside board member vesting over four years of service. Pay early stage board members of companies that are not lifestyle businesses one percent of the fully diluted equity in the form of an option that vests over four years of service.

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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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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Founder Restricted Stock 101

Early Growth Financial Services

The company’s repurchase right in most cases is triggered by a termination … Continue reading → Equity / Debt / Venture Funding common stock founders repurchase restricted shares restricted stock startups vesting scheduleBy Sean Greaney: sgreaney@stubbsalderton.com Originally published on Stubbs Alderton & Markiles, LLP Sean Greaney, attorney with Stubbs Alderton & Markiles, LLP gives an informative introduction to Restricted Stock for startup companies.

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The New Deal – A Founding CEOs Value is Non Linear

Steve Blank

As a founder I fought with VC’s over vesting as they brought in a new CEO and walked me out the door. As a board member I negotiated with founding CEO’s over vesting when I thought it was their time to go. Yet the traditional vesting model ignores this.

Incorporate ‘yesterday’

K9 Ventures

4) Likewise, the date of incorporation often plays a role in what portion of the founders’ stock is already vested at the time of a venture financing. News Startup Life VC business due diligence incorporation legal starting up startup vestingEver since I found the blog Startup Company Lawyer , I’ve had a high regard for its author, Yokum Taku , a partner at Wilson Sonsini Goodrich & Rosati. Yokum’s posts are always chock-full-of-good-information.

8 Ways To Nurture New Venture Stock Into A Goldmine

Startup Professionals Musings

Always specify a vesting period for new partners. Typically, vesting in startups occurs monthly over four years, starting with the first 25 percent vesting only after a participant has satisfied commitments for at least 12 months (one year cliff). Maximize your own vesting if the business is acquired early.

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The Difference between Debt Financing and Equity Financing: Which Is Right For You?

YoungUpstarts

They have a vested interest in providing assistance because they stand to make money off of your success, too. Getting the capital you need to run your business can be a struggle for any business owner. You need money for operations, but most importantly, you need money to grow.

What do investors consider the most important aspect of a potential deal?

Gust

Valuation, Size of Raise, Amount of Investment, Form of Investment, Liquidation Waterfall, Option Pool, Board Composition, Anti-Dilution Rights, Protective Provisions, Founder Vesting, *original post can be found on Quora @ : [link] *. Characteristics of the Entrepreneur. Integrity, Passion, Startup Experience, Domain Expertise, Functional Skills, Leadership, Commitment, Vision, Pragmatism, Flexibility, Personality. Characteristics of the Venture.

Founder’s Stock is Simple, but Watch the Details

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 starts now. They might also have special terms in the case of termination or demotion that accelerate vesting.

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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.

Running From Aspen to Basalt

Feld Thoughts

I’ve been trying different running backpacks and finally found one I like – the Nathan VaporAir Race Vest. I’m running my 25th marathon in South Dakota on 10/8/17.

Why Lawsuits Are On the Rise at Startups and What To Do About It

Both Sides of the Table

He had a stock option vesting program and had vested a significant amount of his stock but not all. He’s suing the company to get all of his stock options even though he signed a vesting agreement. Make sure you have standard vesting – even before your raise capital.

Free Riding is a Serious Problem

ithacaVC

Here is an illustration to drive the point home: The only way to truly protect the founders from each other in this situation is by making sure that the equity owned by the founders reverse vests. The typical vesting period would be 3 years. How long is vesting period?

5 Criteria For Splitting Equity In Your New Venture

Startup Professionals Musings

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. I always tell entrepreneurs that two heads are better than one, so the first task in many startups is finding a co-founder or two.

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Office Hours at SXSW

The Startup Lawyer

If you want to discuss liquidation preferences, vesting schedules, or anything startup-related, I’ll be holding an office hour session this Friday March 7th from 130-230pm at UP Global’s SXSW Startup Oasis. The office hour portion of Startup Oasis is blocks of time where you can meet with mentors across a diverse range of skill sets. […]. Startup Lawyer

What tools can I use to manage relationships with investors?

Gust

…and for a discussion of the investor-side tools, see my answer to: What are some ways you keep track of startups you are evaluating/diligencing/in vesting in? Gust.com is the most widely used tool platform for both sides, with hundreds of thousands of companies and tens of thousands of investors using it to track and manage their relations with the other.

83(b) Elections: A Tool For Managing Startup Taxes

Early Growth Financial Services

Emerging business founders often acquire their stock through a restricted stock purchase arrangement providing for time-based vesting. Startup Equity An emerging business will commonly issue equity to its founders and early employees in the form of restricted stock subject to a vesting schedule that incentivizes those individuals to remain with the company during its critical early years. This guest post was contributed by Daniel Peters and Stefan Smith, Partners at Locke Lord LLP.

Equity for Early Employees in Early Stage Startups

SoCal CTO

Unlike the founders, the employees have to wait until their grants vest, working at a company no longer of their choosing for two years. Stock vests for 4 years. Oh, and one last thing, make sure you figure this out upfront, you have it vest, you have ways to get it back, etc.

Top Five Posts in 2016

Scott Edward Walker

1) The Importance of Vesting Schedules – Part 2. Below is a list of my top five posts in 2016 based on pageviews. Happy New Year! Cheers, Scott. 2) “The Ones Who Didn’t Love It Quit” (via Steve Jobs). 3) The Importance of Due Diligence in M&A Transactions.

An Advisor Equity and Advisor Pool Breakdown

Eric Friedman

Total = 0.75% for 3 advisors that vest as you see fit to help you over the next 1–4 years (more on vesting below). Vesting Schedules. Advisors typically ask to vest in equal installments over 48 months. This is why vesting makes so much sense.

An Entrepreneur’s Guide to Funding the Business

The Startup Magazine

If you have minimal experience and can’t seem to get anyone at a bank or an angel group to give you the time of day, you may be able to turn to those closest to you who have a vested interest in seeing you succeed and want you to be happy.