Hacker News new | past | comments | ask | show | jobs | submit login

Without a written vesting schedule for ownership of shares of a company, a founder could leave (or die or become disabled/incompetent due to sickness/accident) and keep their (or their estate's) share of the company. Those events can completely destroy the value of a company. For example in a 50/50 partnership, the remaining partner would be responsible for 100% of the work, but only receive 50% of the dividends or liquidation value. Those type of events are hard enough to deal with anyway - not having a vesting schedule makes it almost impossible to recover from. For instance if there _was_ a vesting schedule for a partner that left after a very short period of time, the unvested equity could be used to attract another partner.

The vesting schedule should reflect their contribution to the company over time, and can be whatever the founders negotiate as reasonable. If someone helps found a company and brings a ton of immediate value (ie IP or cash or contracts, etc) then their vesting schedule can reflect that. Issues such as assignment to estate or beneficiaries are important legal issues that need to be considered at startup time as 'insurance' against things no one wants to see happen, but might.




It's also important to note that much of the value of any company created in the future as it grows, matures, etc. It sometimes happens that people default to ascribing value based on history or past contributions -- which certainly does matter with respect to the idea, tech, product, early customers, etc -- but is an incomplete ascription of anyone's particular value with respect to the life of a company. Depending on what stage the company is in -- but because we are talking about formation we can assume it is early -- much of the work is likely yet to come. If the past is too heavily weighted, it can cripple the company in the future. Among other things, vesting can help protect founders against over-indexing on the past while ensuring the team is aligned on the future of the company and that are all in it "for the long-haul". Plenty of other reasons to do so as noted in the other comments throughout the thread.

Here is a useful link from Cooley (a large, well-respected law firm) that goes into some of the nuance of these things: https://www.cooleygo.com/founder-basics-founders-stock/




Join us for AI Startup School this June 16-17 in San Francisco!

Guidelines | FAQ | Lists | API | Security | Legal | Apply to YC | Contact

Search: