Equity Ownership and Vesting Rule of Thumb
Sunday, November 4th, 2007A good rule of thumb regarding equity ownership in your company is to institute a vesting schedule on stock grants. This has numerous benefits the two primary being:
- Better terms than the vesting schedule a VC will impose on you…and they will impose a vesting schedule on you.
- Helps eliminate problems and costs associated with individuals leaving the firm with equity before a liquidity event.
The rule of thumb for vesting time horizon is a 1 year cliff followed by straightline monthly vesting.