Tell me more ×
Answers OnStartups is a question and answer site for entrepreneurs looking to start or run a new business. It's 100% free, no registration required.
up vote -1 down vote favorite

My question is this; I have four founders with the following ownership:

Executive/founder/Me 1: 25%

Executive/Co-founder 2: 20%

Executive/Co-founder 3: 15%

Corporate Partner/Co-founder: 40%

After 2 Million Investment from corporate partner it looks like this:

Executive 1: 20%

Executive 2: 15%

Executive 3: 10%

Corporate Partner/Investor: 55%

I am not concerned with the shares awarded from the investment. But the shares they owned as partner, and the shares each other founder owns I want to be vested over at least 2 years. I don’t want anyone to get a “free ride”, and if they need to be fired I don’t want them to have a larger % of the company or bored seat.

This is something that I plan to bring up to my lawyer next week, but if possible I’d like to get some feedback and what options that might be available to me.

What I am curious about is:

1.Can I request that the co-founder shares be vested over 3 years? And mine be full vested? I’ve been working on the company by myself since 2008 and only recently took on co-founders when we had a term sheet.

2.Example, if Executive 2 was fired or moved to a different role, say COO to CFO what would happen to his shares?

3.Currently there are 5 board seats , I plan to add 1 more once we hire our CTO. In the event of a tie as founder could my vote break the tie?

Thanks.

share|improve this question
3  
Yes. Vesting is fine but your questions is unclear. – dnbrv Feb 3 '12 at 2:34
1  
Please explain what kind of feedback you want. – bneely Feb 3 '12 at 5:38
2  
What exactly is your question? – Zuly Gonzalez♦ Feb 3 '12 at 6:23
Sorry, I guess I was just unclear how vesting worked for co-founders. And if I requested say, at least 75% of each persons shares be vested if that was common or not. – Quentin Feb 3 '12 at 7:34
which of these parties is you? – TimJ♦ Feb 3 '12 at 15:48
show 1 more comment

2 Answers

up vote 1 down vote

It's not clear what your problem nor question is. Please re-read your question next time to save everyones time and energy (we're all in startup crunch too!).

Shortly

  • Since executives put in 'sweat equity' they all (you too) should be on a vesting schedule. Why? Because the promise of 'great work' (=> sweat equity) is yet to be completed. The usual pattern is 100% vested over next 4 years or 48 months. Under that "norm" it's

    1. First 12 months = 'cliff': 0% vested: The 1 year cliff is to ensure you made the right hiring decision i.e. allows you to fire people without giving equity/voting rights to a potentially 'bad person'. You could play with a 6 month cliff if you want quick stuff.
    2. At 12 months : 25% vested
    3. Every month after that : (1/48)* 100 % vested each month
    4. => At end of month 48 you're 100% vested

  • The investment itself is putting in equity - outright. It should own it's % shares right away, NOT under a vesting schedule.

share|improve this answer
up vote 0 down vote

  1. So you are suggesting other people have vesting but you do not? That seems hypocritical. Your investors/board surely won't think that is appropriate. Why do you think you deserve special treatment and the others don't? If you think that is fair and that it won't cause bad feelings and de-motivation, go for it - but I think it is a problem.

  2. Why would changing roles affect shares held?

  3. You and the board can write the rules however you see fit

I would be wary of early investment that makes the founders' stake(s) less than 50%. That is demotivating and problematic.

You really need to rethink a lot of things here in my opinion.

share|improve this answer

Your Answer

 
discard

By posting your answer, you agree to the privacy policy and terms of service.

Not the answer you're looking for? Browse other questions tagged or ask your own question.