Comments on: Vesting Hacks: Part I

By: VentureHacks wants to help you get “venture-hitched.” « FoundRead

Fri, 21 Mar 2008 19:18:26 +0000

[...] funding advice, under Hacks. For more, read Nivi’s early Found|READ series on Vesting Hacks: Vesting Hacks: Part I Vesting Hacks: Part II Vesting Hacks: Part 3 Vesting Hacks: Part 4 No comments Share/Send [...]

By: FoundLINKS: Feb 17 - Feb 23 « FoundRead

FoundLINKS: Feb 17 - Feb 23 « FoundRead — Sun, 24 Feb 2008 19:29:08 +0000

[...] have shared their tricks for getting the better of nasty term sheets with us in the past. (See: Vesting Hacks: Part I, Vesting Hacks: Part II, Vesting Hacks: Part 3, and Vesting Hacks 4.) I just can’t decide [...]

By: adambenayoun

adambenayoun — Sat, 28 Apr 2007 06:20:16 +0000

Nivi, Naval,
Wonderful article, very informative and made me ponder about what kind of experience and reading i should aquire.
We are a small startup composed of 3 founders, without equal equity, we never though or knew about vesting terms (Its our first startup), but we did put on paper that we need to commity at least 2 full years before being able to walk out of the business.
I dont think we really though about trusting issue in this case, we know each other for over 10 years, we are just realist and we understand that the startup is a new form of life that need to be secured by locking its founders/parents (including myself).
You never know what can happen in the future.}

By: nivi

nivi — Tue, 24 Apr 2007 19:47:46 +0000

Bill, Aydin,

I don’t really see why co-founders shouldn’t have vesting schedules. Your co-founders may be the most trustworthy people in the universe. But they still may have to leave the business due to unforseen circumstances.

What if they have a child and need to get a job immediately for cashflow. What if they fall ill? What if their father falls ill and they have to take care of him for a year?

Do you really want to use peer pressure to buy back your co-founder’s shares at that point?}

By: aym35

aym35 — Mon, 23 Apr 2007 23:59:09 +0000

Bill, thanks so much for the response. You made excellent points. I agree… very wise comments indeed :) Babak, the reason I brought this up is because our lawyer was trying to push this amongst the founders… I guess he brought on some doubt amongst the founders in the beginning… we did decide not to go with a vesting schedule because as Bill eloquently mentioned, we realized that it does make us look like we don’t even trust in ourselves as founders. I have to say, this was an excellent article and a great source of information.}

By: billh

billh — Mon, 23 Apr 2007 19:22:55 +0000

In response to Aydin, co-founders rarely have vesting schedules between themselves prefunding. There are a couple of issues with doing this: 1) typically, vestingis something the VCs want but founders don’t. If you do it to yourselves, you’ll never get away from it once the VCs enter the picture & it won’t deter them from even trying to take away from whatever you’ve already vested on your schedule, 2) this will send troubling signals to the VCs. They will legitimately wonder if you did it because you weren’t sure whether one of you was going to stick around. But that is counter to the core of being a founder…which is your absolute commitment to the business until the business no longer needs you. If the VCs believe that that commitment doesn’t exist, the credibility of the entire team will suffer and they will (justifiably) exploit it to your disadvantage. BTW - if a potential founder doesn’t have that commitment, make them the first employee with a slug of options that vest without a cliff…not a founder. Other differences between founders, such as centrality of the skillset or expected roles should preferably be dealt with through the AMOUNT of equity distributed to each, not through a vesting schedule. This deserves more explanation but when a founder without vesting does decide to leave, often it gets dealt with through a lot of peer pressure to sell back a portion or all of their shares. Hope it helps. And to Babak and Naval, great article.}

By: joshviney

joshviney — Mon, 23 Apr 2007 19:18:07 +0000

this is great}

By: nivi

nivi — Mon, 23 Apr 2007 19:12:44 +0000

Aydin, is there any reason to wait until the financing to paper the vesting agreements?}

By: aym35

aym35 — Sat, 21 Apr 2007 20:27:03 +0000

should you arrange for a vesting schedule amongst co-founders even before receiving financing?}