3 ms·

Sorry to barge in on this thread - but I have a question that turns this on its head. Let's say you are a brilliant CTO/cofounder, but you are already doing so

Sorry to barge in on this thread - but I have a question that turns this on its head. Let's say you are a brilliant CTO/cofounder, but you are already doing something. Now you had this idea (or someone else had this idea) ... and you want to set them up for seed/series-A round and then you want to leave. assumption - you trust the CEO to not screw you. How do you structure your equity compensation so that you have some benefit after 5 years? One of the thoughts I had was to show the short-term CTO as an investor with vested stock (in return for some negligible investment ... say 100$). Does this protect you from future investor rounds ?

vidarh 13y ago
You don't need to be set up as an investor. You can structure shareholder agreements and different stock classes etc. pretty much as you please, or directly award vested stock (beware your local tax rules if awarding/being awarded vested stock in a pre-existing company - chances are good it'll be taxed as income based on some estimate of market value; but if you enter from the start, as a founder, that's not an issue). The issue in that respect is not what you legally can do, but structuring it in a way that won't scare away investors with too much complexity. Generally, though, nothing will "protect you from future investor rounds" if they really want to fuck you over, other than being diligent and keeping a lawyer around, and picking honest co-founders. If the investors coming in and other still employed founder(s) wants to mess things up for you, it can be tricky to protect against them diluting your share holdings to next to nothing, for example (e.g. do a round on a very low valuation; issue large amount of options to remaining founders to make up for the extra dilution they take). Of course, if investors try to do that, chances are they'll screw the remaining founders first chance they get too.
asabjorn 13y ago
Ask for the same terms as the founders, and ask for a big enough stake that you have something left after a prospective Series B round assuming 20-25% watering down in each round. That makes it so that the founders have to do to themselves what they do to you so your interests are aligned.

vidarh 13y ago

You don't need to be set up as an investor. You can structure shareholder agreements and different stock classes etc. pretty much as you please, or directly award vested stock (beware your local tax rules if awarding/being awarded vested stock in a pre-existing company - chances are good it'll be taxed as income based on some estimate of market value; but if you enter from the start, as a founder, that's not an issue). The issue in that respect is not what you legally can do, but structuring it in a way that won't scare away investors with too much complexity. Generally, though, nothing will "protect you from future investor rounds" if they really want to fuck you over, other than being diligent and keeping a lawyer around, and picking honest co-founders. If the investors coming in and other still employed founder(s) wants to mess things up for you, it can be tricky to protect against them diluting your share holdings to next to nothing, for example (e.g. do a round on a very low valuation; issue large amount of options to remaining founders to make up for the extra dilution they take). Of course, if investors try to do that, chances are they'll screw the remaining founders first chance they get too.

asabjorn 13y ago

Ask for the same terms as the founders, and ask for a big enough stake that you have something left after a prospective Series B round assuming 20-25% watering down in each round. That makes it so that the founders have to do to themselves what they do to you so your interests are aligned.