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4 year vesting with 1 year cliff is just simulating what FAANGs were doing 10 years ago but out of touch tech wannabes are imagining is normal now When we set

4 year vesting with 1 year cliff is just simulating what FAANGs were doing 10 years ago but out of touch tech wannabes are imagining is normal now When we set up vesting for ourselves, we just wanted a huge portion of something for super cheap and taxed beneficially if we made an 83b or 83i election, and we realized that the terms of vesting wasn’t regulated and we had unilateral discretion over everything. Our cost basis wasn’t zero, but we wound up having $200 grants with like 3 month vesting. We exercised immediately, mailed the election in, and then had paper value way higher super fast after sales at much higher prices, with a lot of liquidity. I periodically reaffirmed with my cofounder what the purpose of our venture was “We’re still in the money game, right?” and this supports our financial engineering, as opposed to being steered or married to the particular idea or line of business so all that’s to say, what game are you in? do you two have unilateral control over the contracts? maybe that steers the conversation more than wondering if they could or should make the cliff for some illiquid startup ownership

yowlingcat 3y ago
This works fine if you never plan to take outside capital. Otherwise, expect this to be renegotiated back to market standard 4/1 terms if you ever do raise.
- yieldcrv 3y ago
  correct, we only took non-dilutive capital, nothing that converts to shares people need to use their imagination
  - yowlingcat 3y ago
    Was your non-dilutive capital debt based and/or have covenants? If not, I'm really curious about what kind of structuring you were able to secure. To your point, non-dilutive capital is clearly superior to dilutive capital except when it involves covenants (which is quite often). I do remember Pipe being in vogue a while back around financing based on futures of subscription fees, but so far that's the only model I can think of that isn't debt with either a) its associated covenants or b) some kind of underwriting box piggybacking off of dilutive capital (venture debt)

yowlingcat 3y ago

This works fine if you never plan to take outside capital. Otherwise, expect this to be renegotiated back to market standard 4/1 terms if you ever do raise.

yieldcrv 3y ago
correct, we only took non-dilutive capital, nothing that converts to shares people need to use their imagination
- yowlingcat 3y ago
  Was your non-dilutive capital debt based and/or have covenants? If not, I'm really curious about what kind of structuring you were able to secure. To your point, non-dilutive capital is clearly superior to dilutive capital except when it involves covenants (which is quite often). I do remember Pipe being in vogue a while back around financing based on futures of subscription fees, but so far that's the only model I can think of that isn't debt with either a) its associated covenants or b) some kind of underwriting box piggybacking off of dilutive capital (venture debt)