Note to Founders: Have Vesting

I think vesting is a good idea for the founders (it's in their best interest), but I think if you're asking for someone to commit to such a long time period (ie 4-5 years), then it better be really good equity. Even better than if it were just offered "up front." There are also opportunity costs to consider, so your early employees or co-founders could be off starting their own companies with a lot more equity. So it's probably going to vary by each person, but in my experience, the vested equity has to be really good or I'm not interested.<p>I've been in startups where the vested equity was really low, and I left (I was employee #1). I've also talked with numerous people who thought about joining the same startup, and refused due to a number of reasons, but low equity was mentioned as one of the first reasons.

How about reverse vesting instead of normal vesting? This may alleviate some of the tax consequences of someone that wants to leave early.<p><a href="http://www.joelonsoftware.com/items/2007/07/17.html" rel="nofollow">http://www.joelonsoftware.com/items/2007/07/17.html</a>

I'm curious - how does this compare with the buyout agreement detailed here: <a href="http://news.ycombinator.com/item?id=35192" rel="nofollow">http://news.ycombinator.com/item?id=35192</a>. Do you need to have both vesting and buyout provisions, or is vesting preferential to buyouts, or do you not need vesting with a sane buyout policy?

Would it be possible to "open-source" an operating agreement so that we can actually work these things into our own?

This is a great post. Something we were just considering in our own startup. Since we are just starting out it is easy for us to just brush it aside with our optimism, but really anything can happen, so after reading this post I am sold on doing it.<p>A side note, the book Founders At Work is an awesome read!

Who owns the stock while it vests, the company? As far as percentage ownership for decision making (if that even matters -- I don't now), how does that work?

Thank you Jessica - a very powerful argument for biting the financial bullet and using real lawyers when setting up a startup <i>with stock vesting</i>. I hadn't actually thought about vesting as an issue before for the founders (as my partner and I are decade long friends)

This is one of those ideas that sounds good when you apply it to everyone else.<p>Personally I want to own my shares immediately. You never know what's going to happen and what technicalities will let VCs/the board/others fire you before you're vested.

Excellent point. On a related note how does one legally manage vesting in the case of a merger between two startups? I'm considering a merger with another founder. My startup has been around for a little longer. Any thoughts?<p>

My cynical side remembers doing all the grunt work for 18 months at my first startup and then getting sacked to free up my unvested stock for the hopeless flotilla of "key hires" who proceeded to sink the company.