
Get vested for time served - rms
http://www.venturehacks.com/articles/get-vested-for-time-served
======
BitGeek
Ah, I see venture hacks isn't really on the side of the entrepreneur after
all.

Any VC that asks you to vest your shares is a VC who is trying to steal from
you.

The business pre-money valuation is value you created. Your ownership of that
is property you have EARNED.

When you take VC money, they get a percentage of the company, and your
ownership is diluted, but at the same time the value of the company goes up,
as it now has more cash assets in the bank. The end result is immediately post
money the value of your shares should be about the same as pre-money, only the
ownership percentage of the company is less.

This is fair, and this is the consideration you give up in exchange for their
investment.

However, if they ask you to also re-vest your shares, are asking you to give
up you property (and your voting power) in the hope that you will "Earn them
back"... which first assumes you hav eto earn them (eg: it is a losss of
property if you don't own it anymore) and secondly assumes that they won't
have pushed you out. While your shares are vesting you can't vote them, which
gives the VC even more power.

Finally, they are not giving you consideration for these shares you're putting
in jeapardy and so they are simply asking you to give them something for
nothing. The investment they are making is already paid for by you in the
dilution you are experiencing.

There is absolutely no reason for a founders shares to re-vest.

If your ownership in the company is not enough to ensure your interests are
aligned with the VCs (Who really can't do much to make the company do well,
but you can.) then the VCs wouldn't be investing-- period. So the alignment of
ownership excuse is patently absurd.

No reputable VC will ask you to vest your shares. Only a thief would do that--
you own the shares, and asking you to give them up for nothing is trying to
take advantage.

If a VC wants to put you on a vesting schedule to keep you incentivized....
let him offer you shares out of his pool to vest into.

Anything else is exceedingly greedy on the part of the VC.

~~~
gyro_robo
Hear, hear. Len Bosack and Sandy Lerner of Cisco talked about this in Nerds
2.0.1 here:
[http://video.google.com/videoplay?docid=-2534997893350167670&q;=nerds+2.0.1#53m17s](http://video.google.com/videoplay?docid=-2534997893350167670&q=nerds+2.0.1#53m17s)

They financed the company with credit card debt and were already doing
$250,000-$500,000 a month in business when they finally got venture capital
(after 70+ unsuccessful tries). However, they agreed to a forfeiture contract
and a 4-year vesting period, and strongly advise everyone else not to do it
that way.

They were so disgusted with the way they were treated that they sold off all
their shares long ago. If they still held them, they'd each be worth about $24
billion today (they had 30% of the company, like the Google founders).

~~~
madanella
If you watch the video closely the story is a little different from that. The
hired management forced Sandy out by threatening to quit en masse if she
didn't leave. I got the impression that Don Valentine actually wished she
could have stayed.

~~~
gyro_robo
> If you watch the video closely the story is a little different from that.

I watched it several times. Your summary doesn't seem to conflict with my
post... However, it also doesn't seem to quite fit what they said.

> The hired management forced Sandy out by threatening to quit en masse if she
> didn't leave.

Don Valentine:

"Seven vice presidents of Cisco Systems showed up in my office. We had a
reasonably civil meeting in our conference room, the outcome of which was a
very simple alternative: Either I relented -- and allowed the President to
fire Sandy Lerner -- or they, all seven, would quit."

> I got the impression that Don Valentine actually wished she could have
> stayed.

Sandy Lerner: "Don's opening words to me, you know, the first time I ever met
that man -- I wouldn't have known him from the man on the Moon -- were, _"I
hear you're everything that's wrong with Cisco."_

I didn't say they left in disgust, I said they sold their shares because of
disgust with the way they were treated.

~~~
madanella
Yeah, you're right. I would be interested in hearing the other side of the
story. Why would so many people be willing to risk their jobs to get rid of
her? Either it was an impressive conspiracy or there were some real problems
with how she behaved.

------
rms
I think everyone likes this site because it represents the fantasy of getting
venture capital, which only a very small percentage of us will ever achieve.
I'm not sure about you guys, but I'm a long way away from a five million
funding round. It's still a lot of fun to learn about how to not get screwed
by VCs.

~~~
BitGeek
What would you do with $5M anyway? Would that cover your salary for a year? Or
for 50 years?

I'd like for people to realize that venture capital is not a fantasy, it is a
nightmare.

------
madanella
From my experience, share grants, vesting and equity sharing are some of the
hardest parts of the incorporation process and decision making. It's good to
get as much thinking around them as possible because they are CRITICAL.

