Should founders stock be subject to vesting before a venture financing?
July 18, 2007
Generally yes. Even though the founders stock is issued and outstanding, the company can have the right to repurchase the shares. The right of the company to repurchase the shares will lapse over time or upon certain events, similar to vesting of options. There are two primary reasons for subjecting founders stock to vesting even before a venture financing.
1. If there is more than one founder, then each of the founders should want the company to be able to repurchase the unvested shares if one of the founders leaves.
2. If the terms of founder vesting are reasonable, there is some chance that the terms of the founder vesting may survive the venture financing.