Have questions about founder stock vesting? then read on to learn more about what it is and what market terms look like.

What is founder stock vesting?

When we say founder’s stock “vests”, we typically mean that the founder or founders of a company have granted the company a “repurchase right” to their stock that diminishes over time in exchange for the founder’s continued employment or association with the company.  Note that stock options can also vest, but here I am only discussing the vesting of actual stock, rather than options.

It might work like this: A founder purchases 1 million shares of stock in the newly formed corporation subject to an agreement that gives the company the right to purchase the shares back if the founder leaves the company. If the founder remains associated with the company, after one year from the date of purchase the repurchase right has diminished so that it only extends to 75% of the originally-purchased stock, after two years it only extends to 50%, three years 25%, and after four years the repurchase right is extinguished and the founder owns the shares free and clear. What “vests” over time is the right of the founder to leave the company and keep the purchased stock. [Read more…]