Both Sides of the Table

JUNE 18, 2015

Of course your friend’s company raised $50 million and offers it’s employees free kombucha and desk massages. And even this can’t stop their employees from fleeing after two years of vesting to move on to the next hot startup. For investors life is no different. You don’t need to be hot.

Software Review 150

Software Review Turkey Portfolio Syndicate 150

Startup Professionals Musings

APRIL 8, 2015

One more key employee or one more investor will probably not turn the situation around. Calculate employee stock option values and vesting times, as well as salary. These questions are the key ones in every due diligence effort, always done by accredited investors, but almost never done by key employees and new partners.

Technical Review 120

Technical Review Due Diligence Sweat Equity Burn Rate 120

Both Sides of the Table

FEBRUARY 20, 2019

just having a sparring partner with a vested interest in your success can be useful. The Limited Partners (LPs) who back funds don’t expect their dollars to be passive. The board also needs to be mindful of the interests of other “stakeholders” including debt holders, employees, customers and suppliers.

Venture Capital 236

Venture Capital Startup Angel Investor Silicon Valley 236

The Next Web

NOVEMBER 20, 2013

George Deeb is the Managing Partner at Chicago-based Red Rocket Ventures , a startup consulting and financial advisory firm based in Chicago. In this case, I would take your total ownership and divide it up by employee tiers. You can follow George on Twitter at @georgedeeb and @RedRocketVC. Is this person taking a salary or not?

Cofounder 136

Cofounder Equity Founder Seed Stage 136

Up and Running

DECEMBER 1, 2015

If you’re thinking about extending equity to an employee or a vendor (as in the example above), you should know that the topic is multi-faceted. If however you are giving a “normal employee” an incentive stock option plan (more on that later), that’s entirely different. Finding great employees first. What is equity compensation?

Equity 60

Equity Employee Stock Options Vesting 60

Startup Professionals Musings

APRIL 10, 2016

One more key employee or one more investor will probably not turn the situation around. Calculate employee stock option values and vesting times, as well as salary. These questions are the key ones in every due diligence effort, always done by accredited investors, but almost never done by key employees and new partners.

Sweat Equity 120

Sweat Equity Burn Rate Technical Review Intellectual Property 120

David Teten

MARCH 12, 2012

Our portfolio company BetterWorks cites a report by The World Economic Forum: “Employees are eight times more likely to be engaged when wellness is a priority in the workplace.” A pedometer is a great motivator and if all your employees are wearing them it sets up healthy competition.”

Product 166

Product Portfolio Venture Capital Vesting 166

venturehacks.com

FEBRUARY 24, 2010

The best sellers can sell to customers, partners, investors, and employees. Partner with someone who is irrationally ethical, or a rational believer that nice guys finish first. Build in founder vesting (a.k.a. Got the idea for biz but my partner wanted the quick reward but not the up and down of the journey.

Cofounder 101

Cofounder Founder Technical Cofounder Technical Review 101

Startup Professionals Musings

JANUARY 22, 2013

These shares are allocated and committed, but not really issued and owned (vested) until later. Typically, vesting in startups occurs monthly over 4 years, starting with the first 25% of such shares vesting only after the employee has remained with the company for at least 12 months (one year “cliff”).

Vesting 245

Vesting Common Stock Stock Founder Vesting 245

Both Sides of the Table

MAY 9, 2011

You often have very limited perspective on whether this person will continue to be a great partner 2 years down the line, 4 years down the line, 8 years down the line. You’re only going to find out whether they’re TRULY a great partner after you’ve put in years of money, blood, sweat & tears. Vested over 4 years.

Cofounder 393

Cofounder Founder Vesting Founder Vesting 393

www.paulgraham.com

APRIL 28, 2010

The reason is that employees are investors too—oftheir time—and they want just as much to be able to cash out. Ifyour competitors offer employees stock options that might make themrich, while you make it clear you plan to stay private, yourcompetitors will get the best people. Dont be misled by thisoptimism.

Technical Review 76

Technical Review Startup Software Review Angel Investor 76

Startup Professionals Musings

MARCH 23, 2014

These shares are allocated and committed, but not really issued and owned (vested) until later. Typically, vesting in startups occurs monthly over 4 years, starting with the first 25% of such shares vesting only after the employee has remained with the company for at least 12 months (one year “cliff”).

Stock 256

Stock Vesting Common Stock Founder Vesting 256

The Next Web

AUGUST 26, 2013

Both ways are great, I’ve tried both, but personally I wouldn’t try to start something again without partners. Stefan Tirtey, Partner at Doughty Hanson Ventures , created this document with Berlin early stage investors. 10-20% for employees. But never give away shares without vesting. 60-70% for founders.

Management 120

Management Cofounder Startup Bootstrapping 120

Startup Professionals Musings

APRIL 11, 2021

Early partners or co-founders often drop out of the picture early due to disagreements, and you forget about them, but they don’t forget about the verbal or email promises you made. Later, when your venture is trying to close on financing, or even going public, that forgotten partner surfaces, demanding their original share.

Cost 363

Cost Non-Compete Accredited Investor Cofounder 363

Both Sides of the Table

MARCH 10, 2013

It is my job to be a sparring partner for teams not the decision maker. He had vested 18 months or so. I proposed that the CEO sit down with the CTO and walk him through the legal obligation of the company, which is zero notice, paying for all days worked and all accrued vacation time, and allowing vesting through that date.

Vesting 344

Vesting Cofounder Salary Sales 344

www.instigatorblog.com

OCTOBER 23, 2010

Changing Equity Structures for Early Startup Employees Tweet Recently someone asked me for advice on how much equity they should give to their early employees. His company had just closed an early round of funding and he wanted to cement the employee relationships. Those first employees will take 0.5-1%

Equity 41

Equity Employee Startup Vesting 41

Both Sides of the Table

MARCH 21, 2010

Think of it as similar to an employee stock option. Let’s say you give a warrant to a channel partner to sell your product. In the above example you might say that the channel partner earns 25,000 shares for every $100,000 of your product that they sell in the next 12 months with up to a cap of 250,000 shares.

Warrant 298

Warrant Dilution Startup Stock Options 298

Startup Professionals Musings

OCTOBER 7, 2010

These shares are allocated and committed, but not really issued and owned (vested) until later. Typically, vesting in startups occurs monthly over 4 years, starting with the first 25% of such shares vesting only after the employee has remained with the company for at least 12 months (one year “cliff”). Vesting starts now.

Stock 214

Stock Vesting Common Stock Founder Vesting 214

David Teten

OCTOBER 1, 2015

intrapreneurs, e.g., the employee of GE who is tasked with launching a new business. Partnering with a source of capital, connections, and expertise for a large equity chunk is often worth it in those scenarios (e.g., In those cases, the incentives for the founders and early employees are extraordinarily hard to align long term.

Software Developers 60

Software Developers Software Development Software Review Technical Cofounder 60

Berkonomics

SEPTEMBER 13, 2010

As soon as any outside money is ingested into the corporation, others have a vested and legal interest in the behavior of officers entrusted with the best use of funds. Then along comes either money or contracts from strategic or financial investors or partners. The number of employees grows.

Covenant 59

Covenant Software Review Stock Options Vesting 59

www.chubbybrain.com

SEPTEMBER 28, 2011

declined Microsoft’s offer (summer 2000) to be the first enterprise software company with a.NET product (a Microsoft employee came back from a follow-up meeting with Allen and said “He reminds me of a lot of CEOs of companies that we’ve worked with… that have gone bankrupt.”). Go vest yourself.

Software Review 79

Software Review Startup Technical Review Vesting 79

Ben's Blog

APRIL 28, 2010

When my partner Marc wrote his post describing our firm , the most controversial component of our investment strategy was our preference for founding CEOs. Andy Grove was Intel’s third employee (after the two cofounders Robert Noyce and Gordon E. “You’re just a rent-a-rapper, your rhymes are minute-maid. Thomas Watson, Sr.

Technical Review 78

Technical Review Cofounder Technical Cofounder Software Review 78

Gust

MARCH 16, 2014

These shares are allocated and committed, but not really issued and owned (vested) until later. Typically, vesting in startups occurs monthly over 4 years, starting with the first 25% of such shares vesting only after the employee has remained with the company for at least 12 months (one year “cliff”).

Stock 175

Stock Vesting Common Stock Founder Vesting 175

www.inc.com

SEPTEMBER 24, 2011

Employee Benefits. Back in 1997, Randy Parker was staring at a blank whiteboard, wondering where hed find the money to hire the employees and consultants he needed to build his new product. "We a 50-employee provider of e-marketing solutions to small and midsize businesses, based in Needham, Mass. "We Business Taxes.

Fractional CTO 40

Fractional CTO Equity Iowa Technical Cofounder 40

Startup Professionals Musings

MAY 8, 2022

Old co-workers or new friends with complementary skills usually make the best partners. Giving equity is realistic, but base it on contribution and role, with vesting after time and milestones. The right motivated employees dilemma. The founder’s title and role dilemma. Recognize that the best people don’t work for free.

Founder 325

Founder Hockey Stick Cofounder Liquidity Event 325

Berkonomics

APRIL 4, 2024

As soon as any outside money is ingested into the corporation, others have a vested and legal interest in the behavior of officers entrusted with the best use of funds. Then along comes either money or contracts from strategic or financial investors or partners. The number of employees grows.

Covenant 48

Covenant Software Review Stock Options Vesting 48

www.metamorphblog.com

OCTOBER 23, 2010

Doubtful we’d have access to such a rich employee pool any other way. Outcome: last night a Biz Dev guy from Disney/ABC sent me an email asking about partnering with some of their online properties. Vest, young man. Starting a company without vesting your stock is like getting your girlfriend pregnant on the first date.

Founder 51

Founder Startup Cofounder Vesting 51

www.mattbartus.com

SEPTEMBER 24, 2011

I can’t tell you how often a client calls me up and says something like this: “Matt, we have this great new consultant who is going to make introductions to us to [pick type of business partner]. We will grant him/her X% fully diluted shares up front, and every time he/she makes an introduction, he/she will vest in 100 shares.”

Equity 40

Equity Vesting Silicon Valley Intellectual Property 40

David Teten

DECEMBER 3, 2019

But in business, you want a lot of partners. In the private equity universe, most Partners have primary training as deal-makers, not as managers. Point Nine Capital uses 15Five for continuous employee feedback. See Bessemer Venture Partners’ A comprehensive guide to security for startups. 1) Manage the firm . 2) Market .

Technical Review 78

Technical Review Software Review Analytics Private Equity 78

Reid Hoffman

DECEMBER 10, 2020

If I’m going to find out that a set of founders lack integrity, don’t behave like partners, take on unacceptable risks that might harm their customers or society, or simply aren’t the kinds of people I want to spend a decade with, I want to know those facts before I start down the path of evaluating that investment. I think David’s wrong.”.

Hosting 69

Hosting Hockey Stick IPO Silicon Valley 69

discuss.joelonsoftware.com

NOVEMBER 1, 2010

Right now, my business is just myself and a part-time employee who does support, testing, and product usability design. Im confident that this business will be able to compensate these two additional principles along the way, after initial risk of investing their time, and will later reward their vesting with an exit strategy.

Sweat Equity 40

Sweat Equity Equity Angel Investor Affiliate 40

blog.aparttimecto.com

OCTOBER 23, 2010

Un-knowledgeable - Since it’s just you and your partners, you might not be making the best choices. Communication - Hiring a technical employee early on can sometimes result in a founder developer gap. A development partner is an consulting company that works very closely with you, similar to an internal development staff.

CTO Hire 40

CTO Hire Fractional CTO Equity Vesting 40

Startup Professionals Musings

JULY 10, 2012

Early partners or co-founders often drop out of the picture early due to disagreements, and you forget about them, but they don’t forget about the verbal or email promises you made. Later, when your venture is trying to close on financing, or even going public, that forgotten partner surfaces, demanding their original share.

Non-Compete 249

Non-Compete Accredited Investor Cofounder Startup 249

www.chubbybrain.com

SEPTEMBER 28, 2011

The negativity either impacted investment funding (venture capital fell off a cliff in 2009) or the customers they were targeted as was the case for Untitled Partners who were building a platform for fractional art ownership. We were obviously wrong about Untitled Partners’ ability to grow through the subsequent downturn. #19

Cofounder 89

Cofounder Startup Technical Cofounder CTO Hire 89

Both Sides of the Table

NOVEMBER 4, 2009

Stock vests for 4 years. He’d be employee number 3. You get 1%, you sell for $150 million and it’s in 3 years (e.g. you won the lottery). That’s an after-tax gain of $287,500 / year for 2 years. Wait a second. You didn’t get acceleration on a change of control? Sorry bud.

Stock Options 418

Stock Options Stock Liquidation Preference Option Pool 418

Startup Professionals Musings

MAY 2, 2011

Later, when your venture is trying to close on financing, or even going public, that forgotten partner surfaces, demanding their original share. This problem can be avoided by incorporating immediately after early discussions, and issuing shares to the founders, with normal vesting and other participation rules.

Non-Compete 246

Non-Compete Accredited Investor Entrepreneur Cofounder 246

Startup Professionals Musings

AUGUST 7, 2013

Early partners or co-founders often drop out of the picture early due to disagreements, and you forget about them, but they don’t forget about the verbal or email promises you made. Later, when your venture is trying to close on financing, or even going public, that forgotten partner surfaces, demanding their original share.

Non-Compete 235

Non-Compete Accredited Investor Startup Cofounder 235