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Ask HN: Cofounder vesting schedule for young startup
I've been working on a small startup alone for about four months and I have someone interested in joining as a cofounder. I'm meeting with a lawyer later this week to talk about incorporation and some other legal matters, but I'd like to head in there with an idea of what the ideal outcome should be and unfortunately I don't have much experience here.
Given that I've only been working on the startup for four months, what's a fair vesting schedule so that the cofounder can earn equity in the company? Long term, assuming our partnership works out, I have no problem with each of us owning half the company, but how long should he have to work to get to that point?
Your thoughts are always appreciated.
- aditya 17y ago4 year vesting with 1 year cliff for all employees (including co-founders) is pretty standard. As is acceleration upon exit.
- matt1 17y agoThanks -- I've read that, but it doesn't seem fair to him to make him wait a year to start getting equity when I've only been working on it for four months. See what I mean?
- aditya 17y agoNot really. You're going to wait a year too, ideally ALL co-founders should vest at the same time. Usually, the 1 year cliff is post-incorporation. Although, if he's okay with it - you could probably get away with vesting in 8 months...
- mbrubeck 17y agoWhat's the ownership situation before either co-founder's shares vest?
- aditya 17y agoFounder's receive equity, not options. So, once you sign the papers, you get x% of the company every y months. I'm not quite sure I understand your question, but I guess what you're saying is what happens if one of the co-founders leaves before their equity vests? Then the company (or another shareholder) buys it back from them and it can go into the option pool for employees.
- mbrubeck 17y agoWhat happens if - for example - the company is acquired before either founder's equity vests? Who gets the payout? Someone owns the company at all times, which means at least one founder (possibly both) does not have a cliff in any practical sense. (Since the original poster said he is not incorporated yet, I am assuming he doesn't have any outside investors and is the sole owner, i.e. he now has 100% equity.)
- aditya 17y agoAh, right. That's what acceleration is for. It all depends on how the acceleration clause is written into the agreement, but for founders, they usually have a 100% vesting upon exit clause - while the acquirer may require them to stay on (as with Pownce/SixApart) for a period of time post-acquisition.
- alain94040 17y agoNo cliff for founders. Reverse vesting (you own your shares upfront). Presumably, you have been vesting already for a few months, so you are ahead. I would also recommend at most 51/59 split, not 50/50. You need a way to resolve deadlocks. By the way, consider using my online cofounders agreement before you incorporate (http://fairsoftware.net http://fairsoftware.net), so you can keep working on your project longer before seeing a lawyer (not that I'm advising you not to see a lawyer :-) The system we use is monthly vesting over 4 years, no cliff. I think that's the only fair thing to do with founders.
- jacquesm 17y agoThe best way to resolve deadlocks is to have a partner with a small %age (say 2%, or just a few votes), preferably someone that the other founders trust as being good counsel. Also, I think you meant 51/49. Fully agree with the 'no cliff'.
- matt1 17y agoThanks. Can you clarify: how would I have been vesting if I haven't incorporated yet?
- alain94040 17y agoWhen you eventually incorporate, you can set your vesting start time to whatever you want. If you exaggerate (and claim to be fully vested fr instance), any future investor or partner will request that you fix it. So be fair, and when you incorporate, start your vesting to the date you started really going full speed on your startup. No one will object to that.
- dustingetz 17y agowhats a 'cliff'?