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MenuHow do you determine vesting in multi-founder ventures?
As a member of a four founder group, we are discussing vesting options. At the moment, we are all invested in the idea. But how do we ensure that ownership and benefits are aligned with contribution in the future? In other words, what happens if one of us stops or lowers contribution six months down the road? What if that person then comes back strong six months after that?
Answers
This is a very important issue. Vesting and commitment should be decided upfront and in consensus.
While I could tell you my experiences with founders, I would encourage you to first read this two posts on vesting:
http://www.feld.com/archives/2005/05/term-sheet-vesting.html
http://www.naffziger.net/blog/2007/04/05/startup-stock-options-vesting-schedules-acceleration/
If you want help or advice on how to deal with it please give me a call. I would be happy to share my experiences around this subject.
Wow a whole month and zero answers to this one? Its not a quick one to answer but I'll take a swing at it ;)
I've been in a multi-founder business several times and I can say from experience that it does present challenges. The truth of the matter is that all 4 of you will likely not contribute "equally" over the life of the business, and everyone has to be good with that from the start of there's going to be trouble ahead.
Vesting equity over time is easy, the sword attached to it is how to you oust someone that is not pulling their weight in the view of the other partners so that further equity does not vest to that person.
I think it is very important to clearly define what each of the partners roles are and what value they are bringing to the company up front. Remember, value does not necessarily equate to time committed to the enterprise - sometimes people can add tremendous value with very little time expended (bringing in a key customers or investors for example).
With that clear understanding of roles in place, a regular team review and blind voting can reinforce the question "is this person adding value", and if not, can that be fixed, and if not, should they be taken off the team without further equity vesting.
Things change. People change. Needs change. Your plan has to be flexible enough to add or remove key people as needed to grow the company. If this is clear and understood up front, it will reduce a lot of headaches later.
I hope that helps and I'd be glad to discuss further on a call if you like.
Best success,
Ward
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