Vesting – why you need it?

In the last post I wrote about the basic mechanics of vesting. Now I would like to explain why it is indispensable for every healthy startup to have founders’ shares subject to vesting. The reasons for vesting. Getting shares later rather than sooner is sometimes, counter-intuitively, actually better and this is definitely the case here. Founders themselves benefit from vesting as it locks their partners in the enterprise and guarantees that they will work hard to push the business forward. Founders usually perform dual roles in startups, as they are both their shareholders and employees. This may theoretically result in a situation where a founder quits working and moves to Bahamas but, as a shareholder, continues to reap off profits…

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Vesting – how it works

Vesting is one of the most important elements of every startup’s legal framework as it not only shapes the dynamics between its founders, but may also influence prospects of securing financing. Yet, despite its crucial importance and abundance of articles available online, we often see founders confused with the seemingly innocuous and apparently dreaded question: “are you on vesting”? In this post I will explain the mechanics of vesting and clarify the related terminology. Caveat: vesting is a construction used in multiple contexts and I will only touch upon its use and consequences in the context of startup founders’ stock. What is it? Forward vs Reversed vesting. Vesting provision is usually located in founder’s stock purchase agreements. Its main purpose…

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