Do More Faster India, 2nd Edition

Chapter 73Vesting Is Good for You

Jon Fox

Jon was the founder and CTO of Intense Debate, acquired by Automattic in 2008, and the CTO of Torbit, acquired by WalmartLabs in 2013. He was in the 2007 cohort of Techstars.

Many founders look at vesting as something designed purely for the investors. To them, vesting is simply a way for the investors to protect their own investment and keep the founders involved in the company. While this is certainly true, vesting can also be a good thing for founders.

If you’re not familiar with vesting, the idea is that you earn your stock over some period of time as opposed to owning it outright at the founding of the company. The length of time it takes to become fully vested can vary but is typically four years. How frequently you vest—annually, quarterly, or monthly—also varies.

How could not receiving all your stock up front be good for a founder? Well, the big way this comes into play is with the people you start the company with. Your motives as cofounders are aligned with the investors: both investors and founders want the cofounders to stick around, to be motivated, and to protect their own interests. Without vesting, a company would be left with no recourse if one of your cofounders decided to leave the company, suddenly became unable to work, or needed to take another job to earn some money. In any of these situations the cofounder is no longer contributing to the company and, if you don’t have a vesting agreement, they will own all ...