Board of Directors and Advisors

Accelerating vesting on a sale or termination

You may want the vesting of your shares to accelerate if you are fired or the company is sold. Is that a good idea? Will your investors agree to this? Read More...

Vesting terms that make sense

Equity is often the primary financial motivation for taking risk in a new venture. To be a proper incentive, the reward of equity should be tied to each person’s contribution to the success of the venture. In an ideal world this would mean milestone-based vesting over several years. However, the reality is that few startups can predict what milestones will be most important beyond a few months in advance with any accuracy, and therefore most equity award vesting is time-based. Shares held by founders typically vest over a four- to five-year period on a monthly or quarterly basis . Most non-founder employees vest over a four- to five-year period with a one year cliff (25% vests after the first year) and monthly or quarterly vesting thereafter for the remaining three or four years. The cliff period gives the company time to determine whether the employee is working out before the person gets to keep any of his or her shares. Sometimes founders’ shares do not have a cliff.   Read More...

Board membership and roles

A has the ultimate authority to direct the management of the business and affairs of the company. Legally, the board will authorize the issuance of stock, hire (and fire) senior executives, approve compensation arrangements, including the issuance of stock options, and authorize the company to enter into significant agreements. The board will also be asked to provide advice and approve strategic and operating plans, adopt company budgets and oversee the company’s and financial statement functions. Most importantly though, the board’s most critical function is to help management navigate the myriad critical business decisions that will determine the ultimate success or failure of the company.   Read More...

Control and decision making

The shareholders of a corporation are its owners, and they vote their shares to elect the directors. The directors sit as a board, which, typically acting through a majority, oversees the corporation’s management and sets the overall corporate strategy and direction. Directors have fiduciary duties, so they generally must act in the best interests of the corporation and its shareholders. The corporation’s directors elect officers, including a CEO, who conduct the day-to-day business operations. The board must also approve certain significant corporate matters, such as stock issuances and important contracts. Read More...

Advisory board setup and compensation

Advisory boards can be useful things—especially in the earliest phases of your startup. They are often luminaries, academics and industry experts, and having people like that who are willing to make themselves available to answer questions, provide you with insights, perspective and feedback or to merely lend some credibility to your venture can be very valuable. Calling it a “board” is a bit of a misnomer, because advisory boards rarely actually meet as a group. The amount of time they contribute is often quite limited, and they aren’t generally tasked with a specific project or deliverable like a consultant would be. Read More...

Select Additional Topics