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I don't know... You should probably subject everyone to vesting everyone at incorporation - to keep people from ditching early with a huge slug of equity. Good

I don't know... You should probably subject everyone to vesting everyone at incorporation - to keep people from ditching early with a huge slug of equity. Good investors know this, and will often rightfully insist on some sort of vesting reset - depending on circumstances. It doesn't make you an idiot to take that deal. It makes you a part of the VC machine. It's just how it works. That said, I've seen people raise (smaller amounts) of money without any vesting provisions at all (i.e. the founders owned their shares outright). That, to my way of thinking, makes the investor the idiot. EDIT: I don't mean to imply that resets are a given. Only that they make sense in certain situations, both for founders and investors. There is no "standard", but there are "ways things are often done" for a reason.

cperciva 15y ago
You should probably subject everyone to vesting everyone at incorporation - to keep people from ditching early with a huge slug of equity At incorporation, sure -- because at that point the entire value of the company is the work the founders will be doing in the future. But in the case of yousendit, they implemented vesting at a point where the company already had a significant value; the fact that it was able to survive having two of its three founders fired indicates that their contribution was made before the Series A, not after. It doesn't make you an idiot to take that deal. It makes you a part of the VC machine. It's just how it works. I'd say that anyone who accepts "that's just the way it works" as an answer is an idiot, but maybe that's just my cynicism showing. :-)
mmaunder 15y ago
Our series A investors wanted vesting and we said no. They were cool with it. Vesting for founders is insane. Never accept it. Vesting for execs is mandatory and has saved me once already, ironically because our investors demanded it. Once again I'm surprised at how very very few founders have a thorough knowledge of what they're signing up for and how to get what they want. It's your company. Act like it. You don't need permission and nothing is "standard". Also think hard before you get into bed with A level VC's and angels and make sure you are on your A game because the worlds most skilled investors come with a heavy premium. If you're bringing real value, there's nothing wrong with saying no.
- jpdoctor 15y ago
  > Our series A investors wanted vesting and we said no. It's really a noop on their part. They know full well that if a founder ever leaves the company they can recover the ownership by diluting the bejesus out of him after he's gone (and bonus: everyone else who has already left is also diluted to near-zero). Vesting just saves them the energy they'd have to exert on the backend.
  - stdbrouw 15y ago
    Stock and voting / vetoing rights usually go hand in hand, so it depends on company structure and how well the founders protected themselves against such events.
- patio11 15y ago
  Vesting for founders is insane. Never accept it. This depends a bit on the maturity of the company. For example, at the seed stage, where the founders may only have known each other for 3 months of their lives, very credible people are going to tell you that they can name dozens of reasons why you should have vesting. If money first comes into the company around month 5 and you have a seed round closed around month 8, there's quite a window where acrimonious breakups can happen. In the event of an acrimonious breakup, fast forward four years. In the event you manage to pull the company back from the brink, do you want someone from two lifetimes ago in startup years a) owning ~1/4 of your company and b) looking like Huge Unknown Risk Factor every time you raise a new round or make similarly consequential decisions? That's why smart people who have seen bad breakups before are going to suggest vesting and it won't really be a suggestion. Now, on the flipside, if I hypothetically brought on my best friend to work on AR and took investing at the two year mark, any conversation beginning with "You should really give all your shares back" would be pretty darn brief.
- tptacek 15y ago
  Wow, disagree. Team of 3 founders, no vesting, one walks in month 6, the others stay for 4 years, build company; in the end, all three are compensated the same way. That's a terrible way to allocate equity. Resetting the vesting clock to zero at funding sounds insane, but if you need the money, the people offering it do set the terms. I know a lot of people who've gotten institutional VC rounds for companies; I believe all of them vested. You're right that it probably can't hurt to push back.
deleted 15y ago
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cperciva 15y ago

You should probably subject everyone to vesting everyone at incorporation - to keep people from ditching early with a huge slug of equity At incorporation, sure -- because at that point the entire value of the company is the work the founders will be doing in the future. But in the case of yousendit, they implemented vesting at a point where the company already had a significant value; the fact that it was able to survive having two of its three founders fired indicates that their contribution was made before the Series A, not after. It doesn't make you an idiot to take that deal. It makes you a part of the VC machine. It's just how it works. I'd say that anyone who accepts "that's just the way it works" as an answer is an idiot, but maybe that's just my cynicism showing. :-)

mmaunder 15y ago

Our series A investors wanted vesting and we said no. They were cool with it. Vesting for founders is insane. Never accept it. Vesting for execs is mandatory and has saved me once already, ironically because our investors demanded it. Once again I'm surprised at how very very few founders have a thorough knowledge of what they're signing up for and how to get what they want. It's your company. Act like it. You don't need permission and nothing is "standard". Also think hard before you get into bed with A level VC's and angels and make sure you are on your A game because the worlds most skilled investors come with a heavy premium. If you're bringing real value, there's nothing wrong with saying no.

jpdoctor 15y ago
> Our series A investors wanted vesting and we said no. It's really a noop on their part. They know full well that if a founder ever leaves the company they can recover the ownership by diluting the bejesus out of him after he's gone (and bonus: everyone else who has already left is also diluted to near-zero). Vesting just saves them the energy they'd have to exert on the backend.
- stdbrouw 15y ago
  Stock and voting / vetoing rights usually go hand in hand, so it depends on company structure and how well the founders protected themselves against such events.
patio11 15y ago
Vesting for founders is insane. Never accept it. This depends a bit on the maturity of the company. For example, at the seed stage, where the founders may only have known each other for 3 months of their lives, very credible people are going to tell you that they can name dozens of reasons why you should have vesting. If money first comes into the company around month 5 and you have a seed round closed around month 8, there's quite a window where acrimonious breakups can happen. In the event of an acrimonious breakup, fast forward four years. In the event you manage to pull the company back from the brink, do you want someone from two lifetimes ago in startup years a) owning ~1/4 of your company and b) looking like Huge Unknown Risk Factor every time you raise a new round or make similarly consequential decisions? That's why smart people who have seen bad breakups before are going to suggest vesting and it won't really be a suggestion. Now, on the flipside, if I hypothetically brought on my best friend to work on AR and took investing at the two year mark, any conversation beginning with "You should really give all your shares back" would be pretty darn brief.
tptacek 15y ago
Wow, disagree. Team of 3 founders, no vesting, one walks in month 6, the others stay for 4 years, build company; in the end, all three are compensated the same way. That's a terrible way to allocate equity. Resetting the vesting clock to zero at funding sounds insane, but if you need the money, the people offering it do set the terms. I know a lot of people who've gotten institutional VC rounds for companies; I believe all of them vested. You're right that it probably can't hurt to push back.

deleted 15y ago

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