Practices and Industries
Founder's Stock: Should You Subject It To Vesting Before A Venture Financing?
When the founders of a company invest in their business - either with money or their intellectual property - they get in return what is known as “founder’s stock,” a form of stock in the company that comes with voting rights.
Founder’s stock is often subject to a vesting schedule. That means if the founder leaves the company before the stock is fully vested, the company has the right to buy back unvested shares either at cost or at fair market value, whichever is lower. So, is it recommended to subject founders stock to vesting even before a venture financing? The short answer: Generally speaking, yes.
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