Shares for cofounders
Shared by wordsphrases · 22d ago · 10 comments

Hey! Which part of your future company are you going to share with your cofounders? Is there any industry standards? We are just in the beginning but we would like to have at least verbal agreement on that. Thanks!

Klog · 6d ago

Take a look at this article! https://stripe.com/atlas/guides/equity

AndyDent-Touchgram · 22d ago

Industry standard is four-year vesting with a 1 year cliff which means:

1. The total shares each person gets are spread over four years.
2. Nobody gets access to their shares until they have been there a year, then it's proportionally each month.

This is very important stuff. My co-founder was my best friend, he'd been best man at my wedding 15 years earlier. He bailed only 8 months into the startup and if he'd not been a nice guy about handing his shares back, I'd have been screwed as we went 50/50 without vesting.

wordsphrases · 21d ago

Let me specify something with an example. Let's say I give 30% to my co-founder with 4-year vesting period. That meant that he will fully get it in 4 years and if he leaves my company he will get nothing right? And those 30% will go back to me?

AndyDent-Touchgram · 21d ago

If he leaves within a year he gets nothing (that's the cliff part).
After that, he gets 1/4 the share options on the 1st year then an additional set of options per month
=3/4 36 months total options issued.

Almost all companies give options rather than full shares. Option grant laws vary dramatically per country and are especially complicated in the USA.

Generally, when people don't qualify for their options they go back into an option pool which is a portion set aside for employees 10-12%). Founders may be part of that pool or be granted separately.

see https://hbr.org/2019/04/how-to-make-startup-stock-options-a-better-deal-for-employees

wordsphrases · 21d ago

Got it! But it looks like it's more for employees not for co-founders, am I wrong? I have the same situation but as employee with my current job.

AndyDent-Touchgram · 20d ago

Vesting applies to both founders and employees. The risk of not having vesting is higher the larger the number of shares, so it's even more important for founders.

othmanbenkiran · 22d ago

We're also thinking about this and my cofounder is really into vesting. Basically you can make it so some shares are only distributed after x time, so you make sure your cofounders stay with you.

This talks about it: https://www.ycombinator.com/library/5x-how-to-split-equity-among-co-founders

wordsphrases · 16d ago

Colleagues recommended this https://startupestonia.ee/resources
Probably it's related to Estonia only but anyway maybe it will be useful for someone else.

andrew-miit.co · 21d ago

Like Andy said, we have a four year vesting schedule with a 12 month cliff.

Here is a template for anyone who wants it: https://docs.google.com/document/d/1flgYBFnY4KQRd2GIv1Sd-2kVV4Vv7zFsmQAMnRWqpRo/edit?usp=sharing

Miriam_Dorsett · 21d ago

I would not do a verbal agreement. https://www.docracy.com/application/dochome2