Get Vested for Time Served: Earn Equity Based on Work

This article delves into the importance of vesting for time served, emphasizing that founders and early employees should be rewarded for their contributions and dedication to a startup. It encourages individuals to not simply accept standard vesting schedules that fail to account for their pre-investment involvement. The article provides valuable insights into negotiating equity terms and ensuring fair compensation for your efforts.

• The article highlights a common scenario where founders invest significant time and effort in building a company before a formal investment round occurs.
• It advises against accepting "standard" vesting schedules that neglect to acknowledge the time served prior to investment, arguing for a more equitable approach that reflects the value of early contributions.

The Importance of Vesting

Vesting is a common practice in startup equity arrangements, ensuring that founders and employees are incentivized to remain with the company and contribute to its growth. Vesting schedules typically involve gradual equity ownership over a period of time, often four years.

• Vesting aligns the interests of founders and employees with the company's long-term success.
• It acts as a retention tool, mitigating the risk of key individuals leaving the company prematurely.

Negotiating Equity Vesting

The article strongly encourages individuals to negotiate equity vesting terms to ensure fairness and recognize their contributions. This involves advocating for time-served vesting, where equity is granted based on the period spent working on the company prior to any formal investment rounds.

• The article suggests a starting point of 25% of the founder's shares being vested upfront for a year of full-time work, with the remaining equity vesting over three to four years.
• It emphasizes the importance of demonstrating a commitment to the company's long-term success.

Vesting for Newfound Co-Founders

The article acknowledges the importance of clear vesting terms for co-founders who join a company later in its development. It recommends considering "one-year cliffs" for new co-founders, ensuring that they demonstrate commitment and value before receiving significant equity.

• This approach helps mitigate the risk of co-founders leaving prematurely after receiving a substantial equity stake.
• It encourages a longer-term commitment from new co-founders.

The Value of Time Served

The article emphasizes the significant value of time served, advocating for a more equitable approach to equity allocation that acknowledges the contributions of founders and early employees. This includes recognizing the hard work and dedication put in before formal investment rounds.

• The article argues that those who have invested their time and effort in building a company deserve to be rewarded for their commitment.
• It encourages individuals to negotiate fair vesting terms that reflect their contributions and ensure a balanced distribution of equity.

Key Takeaways

This article provides valuable insights into the importance of equity vesting for time served in the context of startup ventures. It encourages founders and early employees to advocate for fair terms that recognize their contributions, demonstrating their commitment to the company's success.

• Negotiate equity vesting terms based on time served, ensuring your efforts are fairly rewarded.
• Advocate for a balanced distribution of equity that reflects the contributions of all team members.
• Consider using "one-year cliffs" for newfound co-founders to encourage long-term commitment.