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This is a great post and I am glad it is getting high visibility. Everyone involved in a startup should understand this and consider it as part of their 'do I

This is a great post and I am glad it is getting high visibility. Everyone involved in a startup should understand this and consider it as part of their 'do I join' calculation. Additionally, founders shouldn't try to hide it nor should they horde the returns. Clearly founders are the reason the business exists, but the whole team is the reason it succeeds, everyone deserves a piece of the reward. Mark Cuban is a famous founder that understands this and distributing gains well before his big win. [1] One piece of feedback on the terms, 3 month w/ 10 yr window is pretty rough for the company. You will end up with a bunch of random people on the cap table... people that didn't really contribute much in the overall picture. That is annoying as you raise and downright frustrating when you exit. I would suggest you go back to a 12 month cliff w quarterly going forward and maybe set the window at years served, rounding down. My 2 cents. [1] https://www.businessinsider.com/mark-cuban-employees-millionaires-companies-sold-paid-profits-2024-6?op=1 https://www.businessinsider.com/mark-cuban-employees-million...

stefantheard 2y ago
I don't know if I agree - but I'm open to being wrong. I can't recall many scenarios where I thought someone was a strong fit at 3 months but a terrible fit at 12 months. I can probably think of a couple of scenarios for 3 months and 6 months, especially with slower time to value roles like leadership positions. Right now 3 months is within my risk tolerance - and there is another side to the cliff that folks don't talk about too often, pre-cliff people will generally be less transparent with negative feedback for fear of being fired before the cliff hits. I'm ok with giving up a bit of equity and polluting the cap table if it increases transparency faster. Maybe the lower risk bet would be a 6 month cliff but I believe 12 months is too long to hold the equity hostage.

stefantheard 2y ago

I don't know if I agree - but I'm open to being wrong. I can't recall many scenarios where I thought someone was a strong fit at 3 months but a terrible fit at 12 months. I can probably think of a couple of scenarios for 3 months and 6 months, especially with slower time to value roles like leadership positions. Right now 3 months is within my risk tolerance - and there is another side to the cliff that folks don't talk about too often, pre-cliff people will generally be less transparent with negative feedback for fear of being fired before the cliff hits. I'm ok with giving up a bit of equity and polluting the cap table if it increases transparency faster. Maybe the lower risk bet would be a 6 month cliff but I believe 12 months is too long to hold the equity hostage.