Founder Vesting

May 21, 2014

in Legal, Ownership, Starting Up

One mistake we made early on as entrepreneurs was to not implement founder vesting. We used a lawyer with no startup experience to organize ourselves. We overpaid, and we ended up with a terrible operating agreement.

Luckily the agreement we had, along with a super majority vote of the founders, enabled us to allocate future units which provided vesting options to the members which ongoingly participated in the company. Those that left did not receive further participation in those vesting units.

I highly recommend founder vesting in a fair and predictable manner. There should be clear guidelines for how vesting stops for founders, who may try to claim they are still actively involved despite moving on or moving far away.

I think 5 to 8 years is the standard range for founder vesting. I have also seen schemes where some founders are willing to leave their day jobs well in advance of other founders and therefore get earlier vesting of their shares.

I am very grateful that the supermajority voters of our business always chose to implement schemes that have been fair and rewarding for true and substantive efforts on the business.

What are your thoughts on founder vesting?

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