You're right, they get stock. Restricted stock, usually, but still stock. That said, he would have vested none of it in a standard structure. When the company

You're right, they get stock. Restricted stock, usually, but still stock. That said, he would have vested none of it in a standard structure. When the company was actually incorporated, the split was no longer undefined. The VC deserves whatever percentage the founders are willing to sell to them for the millions they put up. I don't think it's usually an unfair trade, given that VC as an asset class has lost money historically.