“Think about this ahead of time.”
Things to consider around equity vesting
By creating a vesting schedule over multiple years you’re encouraging everyone to earn their keep. Plus, investors will expect a market-typical vesting schedule, and not having one wouldn’t be a great sign. Remember that you’re not doing this just because investors expect it. You are doing it because you will create very significant enterprise risks if one of the members of the founding team picks up and leaves for the beach and you are forced to use dilutive equity to bring on replacement talent; not to mention you don’t want to create any incentives for a free ride. Among other things, this should help you address questions like:
- Is the percentage ownership subject to vesting based on continued participation in the business?
- If one founder leaves, does the company or the other founder have the right to buy back that founder’s shares? At what price?
This will require you to think through different scenarios depending on the structure of your company. We’re here to help!
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