Negotiating vesting out of deal
Hey guys,
I am talking to several VCs for series A financing. All of the require reverse vesting of 3-4 years and with a 1 year cliff.
Now, I was wondering whether anybody has any insight if it is possible to negotiate that out of the contract completely. Also, what about accelerated vesting, so that the stock vest as soon as there is a change of control or exit of some sort?
Hopefully there is a VC in this forum, that can tell me if those demands are reasonable or not :)
Series A, founder centric, it will be hard to get reverse vesting taken out, moreso if the investment is in you and not the idea. You should be able to get a clause in that you vest fully if you are fired (without cause) for sure, you need that to protect yourself. For change of control, it depends on the timeframe of the VC firm, do they want to incentivize and early exit or would they prefer you build the business? Remember, you will probably agree to additional reverse vesting as you raise additional rounds, as well as being diluted throughout.
I'm going to guess right now that your shares are fully vested / nearly fully vested, otherwise no VC's would be asking for you to have reverse vesting (3-4 years, 1 year cliff). I seriously doubt you will be able to get VC's to change their mind on this topic as they want to see you are incentivized to stay with the company (if you are fully vested, what's to prevent you from leaving?). At best, I could see you convincing them to give you 3 year vesting with 1 year cliff instead of 4 year vesting with 1 year cliff (4 year with one year cliff are normal terms). Also, I'd think you could get them to include some sort of clause that says you won't lose your shares if you are fired / forced out or give up partial shares in a good leaver clause or something along those lines to make it more fair to you.
With regards to accelerated vesting, I could see this being something the VC's will give up / be willing to give you if you are the founder/management. Typically you'll get double trigger acceleration as opposed to single trigger acceleration upon change in control.
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