How Much Accelerated Vesting Should You Get When You Close Your Funding?
You've just closed your initial funding. You've been running your company for a while, so you're wondering will all your stock options reset?
My answer may surprise you in this short video.
Read The Transcript Below:
I remember when we got started, one of our two investors, his name was Raul. And I've written about him before. Raul was one tough crusty son of a bitch quite frankly.
And I remember him looking at me after we closed the funding and we were in the middle of the negotiations actually was before we closed the funding. We'd already done the term sheet when in the middle of closing the funding and there's a little bit of a negotiation, a little bit of a back and forth that goes on various topics.
And one of the topics was how much accelerated vesting, where the founders going to get? He looked at me, said, "Well, I think I'll give you six months."
And I said, okay. Even though we had been at it for two years. So in theory with a typical four year vesting, we should have gotten two years of vesting.
But I didn't fight him. And I don't recommend you fight your investors either. And here's why. Put yourself in the investor's shoes.
If you're an investor and you've just invested in a company. And now it doesn't matter whether the company's been around for two years or five years or whatever, you want them to be tied to the company for the long haul.
So yes, you can argue for a Series B funding or whatever, maybe the rules are different. But if it's an initial funding for the company and you've been around for a year, year and a half, something like that, expect your investors to reset your vesting schedule, to align with them.
And it makes complete sense because if they don't have you locked in and let's say you've got two years investing like we had. And now we have two more years to come.
What happens at the end of the two years?
In theory I could walk away and then the investors have lost everything. So they're right whether you like it or not, in asking to reset your vesting. So there's some play just like we had. Maybe we got. We got our six months or whatever, and that's fine.
But understand it from their shoes because they've put a lot of money in your company. They've put a lot of faith in you, so they ought to be rewarded for it, and it makes complete sense when they reset the vesting schedule on your business. Remember that. I'm Brett at brettjfox.com. Have a great, great day. Thank you.