

Ask HN: Cofounder vesting schedule for young startup - matt1

I've been working on a small startup alone for about four months and I have someone interested in joining as a cofounder. I'm meeting with a lawyer later this week to talk about incorporation and some other legal matters, but I'd like to head in there with an idea of what the ideal outcome should be and unfortunately I don't have much experience here.<p>Given that I've only been working on the startup for four months, what's a fair vesting schedule so that the cofounder can earn equity in the company? Long term, assuming our partnership works out, I have no problem with each of us owning half the company, but how long should he have to work to get to that point?<p>Your thoughts are always appreciated.
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alain94040
No cliff for founders. Reverse vesting (you own your shares upfront).
Presumably, you have been vesting already for a few months, so you are ahead.
I would also recommend at most 51/59 split, not 50/50. You need a way to
resolve deadlocks.

By the way, consider using my online cofounders agreement before you
incorporate (<http://fairsoftware.net>), so you can keep working on your
project longer before seeing a lawyer (not that I'm advising you not to see a
lawyer :-)

The system we use is monthly vesting over 4 years, no cliff. I think that's
the only fair thing to do with founders.

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matt1
Thanks. Can you clarify: how would I have been vesting if I haven't
incorporated yet?

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alain94040
When you eventually incorporate, you can set your vesting start time to
whatever you want. If you exaggerate (and claim to be fully vested fr
instance), any future investor or partner will request that you fix it.

So be fair, and when you incorporate, start your vesting to the date you
started really going full speed on your startup. No one will object to that.

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aditya
4 year vesting with 1 year cliff for all employees (including co-founders) is
pretty standard. As is acceleration upon exit.

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matt1
Thanks -- I've read that, but it doesn't seem fair to him to make him wait a
year to start getting equity when I've only been working on it for four
months. See what I mean?

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aditya
Not really. You're going to wait a year too, ideally ALL co-founders should
vest at the same time. Usually, the 1 year cliff is post-incorporation.

Although, if he's okay with it - you could probably get away with vesting in 8
months...

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mbrubeck
What's the ownership situation before either co-founder's shares vest?

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aditya
Founder's receive equity, not options. So, once you sign the papers, you get
x% of the company every y months. I'm not quite sure I understand your
question, but I guess what you're saying is what happens if one of the co-
founders leaves before their equity vests? Then the company (or another
shareholder) buys it back from them and it can go into the option pool for
employees.

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mbrubeck
What happens if - for example - the company is acquired before either
founder's equity vests? Who gets the payout? _Someone_ owns the company at all
times, which means at least one founder (possibly both) does not have a cliff
in any practical sense.

(Since the original poster said he is not incorporated yet, I am assuming he
doesn't have any outside investors and is the sole owner, i.e. he now has 100%
equity.)

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aditya
Ah, right. That's what acceleration is for. It all depends on how the
acceleration clause is written into the agreement, but for founders, they
usually have a 100% vesting upon exit clause - while the acquirer may require
them to stay on (as with Pownce/SixApart) for a period of time post-
acquisition.

