FOUNDER SHARES VESTING – THE FOUNDING EQUITY– HOW TO SHARE?

 

 

Founding of a high-tech biotech company often requires assembly of a skilled founding team. Of which all or some will take part in the further management and growth of the company. Allocation of equity among co-founders is naturally an important part of these initial activities. How much should be allocated of the founder shares to each founder? And on what terms? A start-up founder agreement can be part of the different types of contracts entered by you and your co-founders during the start-up phase. Division and vesting of employee options is another matter upon which the investor most likely will have an opinion.

Founder shares and a founder share vesting / share repurchase agreement: Although I have not personally taking part of entering such an agreement during a biotech start-up I would highly recommend formulating one as part of a general stockholder agreement with an accomplished lawyer if the budget allows it. Consider this, you are staring a company with a friend and are sharing the founder share pool 50%:50%. You both agree on devoting your full time to the company However, just a few months after kick-off, your friend leaves your company. He/she wishes you all the best of luck with the company – and is, at least if no vesting agreement have been agreed upon, able to leave with the 50% founder shares as a permanent asset. It is of course a subjective matter whether this is optimum for the business and the other founders– a founder share vesting/stock repurchase program tries to take such situations into account by the fact that final ownership of the founding shares are granted on time-based (for instance vested on a quarterly basis on a three year horizon). If a person leaves the company or reduces affiliation with the company for other reasons, the founders are allowed to repurchase the non-vested pool of shares at the original price. Immediate vesting of a certain level could be an option.

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SAMPLE AGREEMENT

A sample founder stock purchase agreement for inspiration:  

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EXCELLENT BOOK FOR HIGH-TECH START-UPS

ENGINEERING YOUR START-UP
By Swanson & Baird
Recommnended resource for practical informations with respect to founding a high-tech Company. Includes discussion about stock-options and vesting of founder shares.

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