Article · 10 min read

Founder Vesting in a Shareholders' Agreement: What Startup Founders Must Know

Treelife Free Intermediate India

The India-specific piece that tells you where the split actually gets signed. It separates the founders' agreement (equity, roles, IP, vesting between you) from the shareholders' agreement (your terms with investors), and stresses the timing that trips Indian founders up: get vesting in writing before shares are issued, because you cannot bolt it on retroactively once the cap table exists. It also breaks down good-leaver vs bad-leaver treatment, which is the clause that decides what a departing cofounder actually keeps.

  • Document cofounder equity and vesting at or before incorporation and before shares issue, since Indian law makes retroactive vesting nearly impossible without every founder consenting
  • The 4-year vest with 1-year cliff is standard in India too, with unvested shares forfeited to the company at nominal price in a bad-leaver exit
  • Negotiate clear, objective good-leaver vs bad-leaver criteria and ensure already-vested shares are retained regardless of how you exit
Open on treelife.in ↗

It answers 5 questions

  1. What does co-founder vesting actually mean, and why do I need it even if we trust each other?
  2. What is the difference between issuing shares to a co-founder and giving them stock options, and which should I use in an Indian private limited company?
  3. How should I split equity with my cofounders before I raise?
  4. My co-founder and I are drifting on commitment. One of us is all-in, the other has a job. What do we do?
  5. We split equity 60/40 a year ago and it now feels wrong because one of us did far more. Can we still change it?

Read with it

  1. This is the tool for the exact fight you are having: it scores each founder across Idea, Business Plan, Domain Expertise, and... Carnegie Mellon University Tool · 15 min read The Founders' Pie Calculator Frank Demmler
  2. This is the canonical case for splitting close to equal, written by a YC group partner. It arms you with the exact four reasons... Y Combinator Essay · 5 min read How to Split Equity Among Founders Michael Seibel
  3. A clean, mechanics-first explainer on why every founder, including you, goes on a 4-year vest with a 1-year cliff. It spells... Rho Article · 9 min read Vesting 101: Structuring Equity for Founders and Employees Pia Mikhael
  4. This is the plain-English explainer that says the quiet part out loud: the 4-year schedule with a 1-year cliff exists so a... HSBC Innovation Banking Article · 9 min read Founder vesting: what early-stage founders need to know HSBC Innovation Banking
  5. Carta administers cap tables for tens of thousands of startups, so this is the canonical reference on how vesting actually... Carta Article · 12 min read Vesting explained: schedules, cliffs, acceleration, and types Carta
  6. A concrete account of co-founders going full-time on a stagger, not in lockstep: Erich left his job in July 2018 to run sales... Indie Hackers Article · 12 min read Quitting Our Jobs to Follow Our Callings Alessandro DiSanto and Erich Kerekes
eChai Partner Brands The partnership →