equity, vesting, compensationI am about to embark on the startup path and want to establish beforehand with my partners how much everybody owns and what the vesting schedule is (4 years and 1 year cliff).
My question about vesting is: when should it be implemented? If it’s right from the start, and the cliff is 1 year, but it takes us 1 year to actually build a working concept, then the whole idea is pretty useless because by that time anyone can leave, having one fourth of his shares, and without further contributing to the growth of the company.
Standard vesting provisions typically entail a one-year cliff with monthly vesting over the ensuing three years.
While this four-year vesting structure is the norm, you could think about some variance and propose to your partners.
1 year of development is sufficient to a lot of startups to succeed, and then, no co-founder in their right mind, will think about leaving once he is getting more equity of a succesfull startup each month..
But if you are really concerned about the risk of people leaving with a substantial share of the startup without commiting until the “end”, then you could just adjust the vesting accordingly to a 5 or even 7 years schedule.
Let’s say everyone have agreed with a 6 year vesting schedule. The numbers could be something like this:
1 year cliff : 12.5%
Each month forward (x60): +1.458%
Or even more conservative:
1 year cliff : 5%
2 year cliff : 5%
Each month forward (x48): +1.875%
And yes, you need to do this before coding your first line of code.
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