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Structering vesting plan for co-founders
I have a question in regards to structuring a vesting plan for co-founders.
Our situation is that we are three co-founders with equal share. Because our
project is a non-profit community project, we cannot be sure about
everybody's time commitment as time passes on. Our project might not become
a fulltime opportunity for some time if ever.
So we were thinking when one partner drops out, that the other partners vest
with more share for the time of service they participate. The question is
how to structure this the best way:
a) Dilute shares over time so that the part of the dropped out partner
becomes smaller and smaller over time.
b) Somehow create a pool of undistributed shares and then vest for the
time of service.
I am not sure how the latter option can work as the entity itself cannot own
itself I assume. Another piece of information is that we are considering an
S-Corp just because we can deduct any operation expenditures from our income
Any suggestions on how this is normally structured?
[removed to protect privacy] (cell)
I may be stating the obvious here, but a not-for-profit has no shareholders.
Date: Tue, 15 Jan 2013 10:42:56 -0800
Subject: Re: [FD Members] Structering vesting plan for co-founders
CC: [removed to protect privacy]; rica...@ontechies.com; johanbo...@gmail.com
I have this exact same question.
I'm assuming it's non-profit with a small n and that you're not actually non-profit status.
I guess I don't understand the problem. Let's say everyone is on the same vesting schedule (let's say 4 years) and let's say you want some minimum commitment so you have a 6 month cliff. If the person leaves within 6 months, then 100% of the equity/options go to remaining 3. Even if they leave after 6 months, they'll only have ~ 4% after 4 years. Of course you can always issue additional equity later to further reduce.
On Jan 15, 2013, at 10:48 AM, Eric Rogness <ericrogn...@hotmail.com> wrote:
I agree. Im not a lawyer and defer to any here. However, I have started both nonprofits and for profits. If your status is indeed nonprofit (501c3 or similar) you cannot distribute profits to shareholders or yourselves. So the concept of equity doesn't make much sense. If this is more about control over the direction of the non profit, you can probably handle that through some sort of board structure where you are all on the board but that is subject to some sort of minimum time commitment etc. Just a thought.
Sent from my iPhone
On Jan 15, 2013, at 1:48 PM, Eric Rogness <ericrogn...@hotmail.com> wrote:
I think it's important to note that there is a distinction between protecting the interests of employees who keep the faith and just being punitive. Saying FU to someone after they put in a year of their life into the earliest, highest-risk stage of a company just because it's no longer a fit is bad form in many cases. Put in a longer cliff or back-weight vesting to make it super-clear what the expectations are for commitment, but don't put in clawback provisions. In the end it doesn't really matter because you can always issue more equity to dilute people who leave.
On Jan 15, 2013, at 11:43 AM, Jai Jaisimha <j...@openmobilesolutions.com> wrote:
We are starting it as for-profit company. It is a hobby for now and we do not have a revenue model, but that does not say that we will have one at one point.
On Jan 15, 2013, at 1:09 PM, Inder Singh <irsi...@gmail.com> wrote:
BTW, I am reading a great book right now that talks about how to structure
founder relationships. It's based on a lot of research.
This is what Brad Feld had to say about it:
If you are a founder, or considering being a founder, a board member, or an
investor, buy The Founder?s
Dilemmas<http://www.amazon.com/exec/obidos/ASIN/[removed to protect privacy]/domofa-20>
now. One of your goals should be to do everything you can to maximize your
chance of success. This book will help a lot and you won?t regret the time
you invest in it.
Co-Founder & Organizer, CTOSchool.org, an NYC meetup for startup technical
email: jean.barm...@gmail.com | skype jbarmash
On Thu, Jan 17, 2013 at 1:35 PM, Stefan Brunner <sbrun...@spamcop.net>wrote:
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