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The stock vests over time. Four years isn't the typical time for stock to vest; it's the typical time to be fully vested. Usually it's 1/4 per year for 4 years.
by mhartl 15y ago
The stock vests over time. Four years isn't the typical time for stock to vest; it's the typical time to be fully vested. Usually it's 1/4 per year for 4 years.
Vesting doesn't just protect investors. It also protects cofounders. Suppose you start a venture 50/50 with a buddy. After a year, he leaves, and three years later you've bootstrapped the company into a $100m business. Without vesting, your cofounder would still be entitled to 50%. With vesting, he would get 25% of 50%, or only 12.5%.
- pmjordan 15y agoSorry to be nit-picking, but the percentage of shares issued that the departed cofounder holds after 4 years would be 20%. It's not helpful to look at percentages during the calculation: look at absolute number of shares. If 1 share vests each month, the remaining founder has 48 after 4 years, the departed one retains 12, hence 20%. Of course, this ignores any further shares the remainin founder might issue to himself by investing his own money or assets (he holds a majority stake, so that shouldn't be too difficult)