Boy, the longer I deal with early-stage tech companies the more I'm amazed by the prevalence of teams that operate without founder stock vesting.
As you know, most startups get going with a team of two or three folks coalescing around an idea - and then spending perhaps years, with their own sweat and nothing else, developing a product or service and getting it going to the point they can raise money and scale it up. Assuming they've addressed ownership at all then they've probably agreed some split based on contribution of effort and skills, and it feels equitable (not the same as equal) to all involved. Hopefully they also set aside stock for others they've hired along the way, or contractors paid in equity and so on.
That's good, as far as it goes. Where it falls apart is if that stock hasn't been subject to a vesting schedule. In essence the ownership needs to be EARNED over the time each person has been contributing, not just given up front. In the extreme case, without a vesting schedule you have the potential for the ugly situation where one founder may just decide he's had enough and moves on, leaving his two co-founders to carry on and make the business work. Is it fair that he walks off with all his stock and is not adding any more value, while the others remain trying to make theirs - and therefore his also - worth something? Obviously not. And not only that, its a chunk of ownership not now available to recruit a replacement.
The standard approach is to structure founders stock just like a regular stock option - vest over 4 years with a one-year cliff. And the logic is the same - you gotta stick around long enough to start with to have made a real and substantial contribution to the company and your team members. Then you keep earning more monthly as you go. Leave at any time after one year and you get to keep what you've earned - no more, no less. Have an accelerator in there in the event that the company is sold, sure.
Obviously this approach does not, per se, apply to a solo founder for obvious reasons - but most startups are founded by teams and they must address this question.
One objection some founders have had to putting these structures in place is their fear of the cost and complexity - and when you have no cash its hard to think about paying lawyers to do this stuff. Frankly, that's a non-issue. Reputable Valley firms will help you set this up for deferred or no fees at all, or you can simply go to my friends at Orrick who have set this up online for you for free (but consult them if these don't fit your situation). Go here to go through the Q&A process and create your Founder Term Sheet (in essence defining the founders, their ownership etc) and then here for the various legal agreements to document the deal. There are other similar sources out there if you look around.
So now you have this in place. Lets say that helps encourage everyone to be in the boat pulling hard to make it worth something. Well, in my next post I'll discuss what happens to all this when you raise venture capital ... and it may not be what you think!