3 ms·

Are you sure that 1-year cliff is a good idea for founders? A lot can happen in a year, and founder disputes are A Thing; and it sucks for the person with 49.9%

by gwillen 12y ago

Are you sure that 1-year cliff is a good idea for founders? A lot can happen in a year, and founder disputes are A Thing; and it sucks for the person with 49.9% to be in a position where any unresolvable disagreement in the first year means he walks away with nothing.

patio11 12y ago
I agree with you that a lot of founders have catastrophic breakups in the first six months. In most cases, this kills the company, and good riddance. In the cases where it doesn't kill the company, the cliff minimizes years of painful conversations of the general flavor "Hello, 10th engineer. We are happy to offer you 0.2% of the company, which you'll earn over four years with us. This grant represents 1/250th of what someone who worked with us for two months once earned." or "Hello, potential acquirer. That certainly sounds like a very fair offer. Unfortunately, I'll need to run it by someone who I haven't spoken with in 5 years who you'll be writing a check for several tens of millions to." Cliffs are, of course, negotiable. If someone suggested one to me with regards to my business, I'd accept it contingent on the clock starting at either launch or incorporation, either of which would result in the cliff being moot.
jacquesm 12y ago
It keeps your cap table clean, which you will really only appreciate later on.
edanm 12y ago
This also depends somewhat on what it means for someone to leave the company. This is actually not a simple issue - e.g. as the CEO of the company, you may be entitled to fire someone, even a founder, and that stops the vesting. But usually you'll have a board of directors, and the board is allowed to overrule the CEO, and guess who else sits on the board? The co-founder. This gets very complicated very quickly. That's why you should consult lawyers (or legal documents available online, but unless you're a lawyers you should consult one anyway). I'm actually not sure how this gets resolved in most startups. Oftentimes there are clauses like Shotgun clauses that try to solve this in a catch-all manner, providing a way of forcing people to sell their shares.
paul_f 12y ago
Usually for someone to lose their future vesting, they have to walk away, or be removed "for cause." A disagreement between founders is insufficient. Forming a company with partners is like a marriage. You can't dabble in it.

by gwillen 12y ago

patio11 12y ago

I agree with you that a lot of founders have catastrophic breakups in the first six months. In most cases, this kills the company, and good riddance. In the cases where it doesn't kill the company, the cliff minimizes years of painful conversations of the general flavor "Hello, 10th engineer. We are happy to offer you 0.2% of the company, which you'll earn over four years with us. This grant represents 1/250th of what someone who worked with us for two months once earned." or "Hello, potential acquirer. That certainly sounds like a very fair offer. Unfortunately, I'll need to run it by someone who I haven't spoken with in 5 years who you'll be writing a check for several tens of millions to." Cliffs are, of course, negotiable. If someone suggested one to me with regards to my business, I'd accept it contingent on the clock starting at either launch or incorporation, either of which would result in the cliff being moot.

jacquesm 12y ago

It keeps your cap table clean, which you will really only appreciate later on.

edanm 12y ago

This also depends somewhat on what it means for someone to leave the company. This is actually not a simple issue - e.g. as the CEO of the company, you may be entitled to fire someone, even a founder, and that stops the vesting. But usually you'll have a board of directors, and the board is allowed to overrule the CEO, and guess who else sits on the board? The co-founder. This gets very complicated very quickly. That's why you should consult lawyers (or legal documents available online, but unless you're a lawyers you should consult one anyway). I'm actually not sure how this gets resolved in most startups. Oftentimes there are clauses like Shotgun clauses that try to solve this in a catch-all manner, providing a way of forcing people to sell their shares.

paul_f 12y ago

Usually for someone to lose their future vesting, they have to walk away, or be removed "for cause." A disagreement between founders is insufficient. Forming a company with partners is like a marriage. You can't dabble in it.