What keeps founders in startup after vesting?


3
Suppose 2 founders started a company. After 4 years and full vesting one founder decides to leave. Then after 2 more years company successfully sold and both receive the same value. That looks unfair. So why founders are compelled to stay in a company even if they receive the same value as if they not?

Equity Vesting

asked Apr 16 '14 at 13:46
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Роман Семенов
16 points
Get up to $750K in working capital to finance your business: Clarify Capital Business Loans

2 Answers


3

There are several reasons to stay, and why the founder who leaves could be at a loss:

  • The startup could raise another round of financing in which the founder that left could be significantly diluted.
  • The founder that stays would likely get equity grants to ensure they're compensated for staying on board the company (ex: look at Aaron Levie of Box). Thus, getting more equity in the company (and a higher payout upon acquisition or IPO).

This is true for key employees as well, not just for founders -- after the vesting period ends, and if they're key to the company's success, they get another vesting schedule and equity grants (for more equity on top of what they already have).

answered Apr 16 '14 at 15:26
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Chrissie Gray
1,107 points
  • Is it possible that founder that left will be diluted to almost zero after the next round? For example company issues 100x more equity which is split between staying founders and investors. – Роман Семенов 7 years ago

1

Having fully vested equity in a company that is worth zero (at the time the founder leaves) is still of zero value. By leaving, a founder has no control of the startup's outcome.

In terms of fairness to the other co-founder who sticks around to try to make the company a success, they can get more equity after the vesting is complete (with board approval, of course).

answered Apr 17 '14 at 18:17
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Bruce Schwartz
767 points
  • Is it possible that founder that left will be diluted to almost zero after the next round? For example company issues 100x more equity which is split between staying founders and investors. – Роман Семенов 7 years ago

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Equity Vesting