I'm starting a business and want to know what is a typical vesting schedule for founders equity shares? Should some portion of the stock vest right away? How long should vesting take?
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I'm of the opinion that "founders" shouldn't get any shares unless they stick with the business. There is a very good chance that in a few months one of the founders will lose interested and leave the business. If that happens, you definitely don't want them to own half the company. I'd recommend a 4 year vesting schedule with a one year cliff. This means the founders' shares will vest on a quarterly (or monthly basis) over four years. The term "one year cliff" means that none of the shares vest until until the end of the first year (at which point 1/4 of the total shares vest). After the "cliff", the remaining shares vest evenly every quarter/month. This way you create incentives for founders to stick around to earn their shares and prevent them from bailing out during the first year when the ground work of the company is being laid. |
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I agree with Rohin on 4 year vest with a one-year cliff, but I think the cliff isn't necessary for Founders. The idea of the cliff is that bringing someone on represents an investment in that person for the company, so this helps them mitigate the risk if the person is a bad fit. With Founders (who are already taking a substantially reduced salary, if any), there's not much of a need for this since the Founding team should know eachother well before taking on this kind of a venture. |
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