Module 2 · Chapter 5

Vesting, Leavers and the Founder Who Left

Founders usually earn the right to keep their shares over time, and give back the rest if they leave early. This chapter shows how that works, and why one promise to do it failed.

≈ 14 min read 8-question test

In this chapter

  • How reverse vesting and the cliff work
  • What good and bad leavers keep, and at what price
  • Why a vesting promise must be written into the constitution

5.1Founder vesting in one paragraph

Investors pay for a company whose value depends on its founders staying. So a founder's shares are usually tied to time served. A founder owns every share from the start, but earns the right to keep them month by month.

If the founder leaves early, the shares not yet earned can be taken back for what the founder paid. This is reverse vesting. It works only if the company's constitution gives the power to move the shares.

Key point

A contract lets the company sue a leaver. Only the constitution lets it move his shares on the register without him. So a vesting promise must be written in both places.

Also in this chapter

  1. How reverse vesting works
  2. Good leavers and bad leavers
  3. Who receives a leaver's shares
  4. Why the founders' promise could not be enforced
  5. The settlement, one day before the cliff
  6. What the deed got right, and what it missed
  7. Your job

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