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Saksham

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Bebyond • 1m

Why Every Startup Needs a Founder Vesting Clause When launching a startup, it's crucial to protect your team and the company’s future. One key safeguard? The Founder Vesting Clause in your Term Sheet. What is Founder Vesting? Founder vesting ensures that equity is earned over time, protecting the company if a co-founder leaves prematurely. Without it, a departing founder could take a significant share of the company, leaving the remaining team with the burden. How Does it Work? - Vesting Schedule: Typically, equity vests over four years with a one-year cliff. This means if a founder leaves within the first year, they receive nothing. After the cliff, equity vests monthly or quarterly. - Accelerated Vesting: Some agreements include clauses for faster vesting if the company is acquired or a founder is terminated without cause. Why It Matters A Founder Vesting Clause aligns everyone’s interests, ensures stability, and protects the company’s equity. It’s a small step with a big impact, laying the groundwork for long-term success. Don’t overlook this crucial element when drafting your Term Sheet—it's essential for a thriving startup.

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