Re:Lecture 18: Legal and Accounting Basics for Startups
by danieltillett on Friday November 21, 2014 @04:59AM
(#8640579)
If you had worked without pay you should have been able to use that as leverage to get vested - this was one of the points made in the lecture of why you should always pay the founders.
Re:Lecture 18: Legal and Accounting Basics for Startups
by dllthomas on Monday November 24, 2014 @03:01AM
(#8651448)
Yeah. There's an exception when you own enough of the business, but if there's a cliff and they kick you out before it you didn't actually own enough of the business. It seems likely they owe at least one of ownership or backpay.
Re:Lecture 18: Legal and Accounting Basics for Startups
by SeoxyS on Friday November 21, 2014 @03:41AM
(#8640395)
I agree... there's too much room to get screwed over royally with cofounder vesting cliffs. The equity stakes are so much higher founder, and the compensation is usually either mostly or entirely stock. That means that if there's a breakup, the founder who gets booted is completely screwed and lost a year of their life for nothing.
I wouldn't have a 1-year cliff for any below-market employees. I'd reserve 1-year cliffs for employees with market salaries that happen post-funding.
Re:Lecture 18: Legal and Accounting Basics for Startups
by ehurrell on Friday November 21, 2014 @04:13AM
(#8640468)
It seems to be in these legal areas that people expose what's really important to them. Sadly sometimes that means finding out people you thought were friends are capable of toxic things, even when you have written agreements. It can be a tough thing to learn, but I'd bet you are better off for learning it.
Re:Lecture 18: Legal and Accounting Basics for Startups
by TheBiv on Friday November 21, 2014 @03:13AM
(#8640315)
Very interesting. Considering your scenario, would you advise others to not have a cliff or have a X month cliff?
Re:Lecture 18: Legal and Accounting Basics for Startups
by suchthrowaway on Friday November 21, 2014 @04:28AM
(#8640495)
At the end of the day, you really have to trust your cofounders. Betrayals happen but you can't found a company with people you don't trust.
A cliff still makes sense in cases when a cofounder abandons a start-up and stops working. Maybe the safest way for everyone involved is to only apply cliffs for the first 3 months or in the case of voluntary departure. That still leaves room for abuse but at least the temptation is more limited.
I'm sure the folks at YC have experience with just about every permutation of this scenario. I wish the video had also covered protecting the founders on the other side of a split up.
Re:Lecture 18: Legal and Accounting Basics for Startups
by brackenbury on Friday November 21, 2014 @09:17AM
(#8641329)
Trust is not a binary value. When large sums of money are involved you don't want to rely solely on trust.
I worked without pay for 6 months. I had no indication anything was wrong. We raised a seed round were about to finally start paying ourselves the cofounders booted me. Suddenly they weren't happy with my performance, though days before they'd praised it. Worst of all one of them still hadn't quit his full-time job!
The vesting cliff protects those who stay from a founder leaving early, but it also creates the possibility of a founder getting strategically booted once the business is less risky and/or starts getting traction. To be perfectly honest after going through this, I'm not very inclined to do a founder vesting cliff again.