CTO · Vesting

CTO vesting bound to time and development milestones?


May 25th, 2016

I understand the concept of vesting, you want the founders to stick around and not just leave the company with their share. Recently I had investors asking me to commit to 5 year vesting conditional to meeting product roadmap milestones.

Is this a common request? or doable for a 5 years time-frame? I am a bit surprised and I am more on the side that this cannot be done without there being a conflict of interest. The company is quite young, and agreeing to something like this would make my life difficult when I will need to choose between developing a feature needed by a customer and pushing the roadmap forward.

Did any of you experienced something like this?

cwikla CTO

May 25th, 2016

As CTO you and the other founders should be worried about moving the company forward, not about a product road map.  With a tunnel vision mentality of adhering to a road map you are correct that you will miss opportunities to please (or secure) that next customer, as business needs will and do change (for good reason). 

A product road map should be a template of where the product needs to go to meet the business needs as they are seen from this point in time going forward.

The reality of any development (and most things, actually) is that the farther out in time something is, the less reliable any forecast becomes. If there is a 5 year product road map that you must adhere to, you will fail.  The business will change, parts of the product will need to be bigger than you thought, other things will be more complicated, and other parts won't even be necessary. 

Something you should agree to (and is implied with the title of CTO) is that your job is to get shit done so the business can worry about being a business.  Your team mates should be able to count on your sprint this week (a baby product road map) being complete.  They should be able to count on you that  your next sprint is going to get done - but they should also realize that there is less chance than this week. 3 weeks from now even less of a chance of being 100% correct. (Unless you are half-assing it and/or overestimating what you can get done).  3 months from now, maybe 50/50 since who knows what's going to be needed then? 1 year or more from now? Those are aspirational. They are very useful, they help guide the vision of the company. And even in the short term, sometimes shit happens so you fall behind.  Other times you get ahead. Over the long term hopefully it evens out, but it's never perfect.

Things change, and you never know when opportunity knocks and you need to deviate from your road map.

As CTO you should be constantly working with the CEO to keep your product road map up to date and make sure your team is working on the most important business needs.  You should be estimating what you can get done and when so the business can plan for it.  The business side should understand that the farther out, the less probable that it will happen.  This isn't a bad thing!  This is just forecasting on both sides to make sure the company stays on track and isn't just shifting all over the place. 

Should your ultimate goal be to meet the product road map? No. Your goal should be to do whatever it takes so your business is successful. On the tech side, a product road map is an extremely useful TEMPLATE for getting there and for giving the rest of the company the knowledge they need to make their own road maps.

If you can't do that, they should fire you. Who cares about vesting at this point?

For 5 years vesting, I'd see no problem in accepting it if every founder has that same vesting.  I'd want to know why they think it should be 5 (4 was pretty much a made up number from years ago that people just use by default). If they don't have a good reason, I'd stick with 4. If they have a good reason, it might be a good bargaining chip for acceleration, triggers, buy back clauses, etc... Although I would put forward that getting employees to accept 5 will be rough since 4 is the norm. 

(Incidentally, this is also the reason most outsourcing fails, but that's for another response....;))

Joe Albano, PhD Using the business of entrepreneurialism to turn ideas into products and products into sustainable businesses.

May 25th, 2016

I've always been a fan of results based vesting instead of time based vesting. It seems to me that time based vesting encourages people to find a way to stick around and that results based vesting encourages people to get things done. 

Just something to think about. 

David Pariseau

May 25th, 2016

That does seem like an odd request.  Road maps are notoriously difficult to manage with the frequent priority shifts and resource flux inherent in a startup. Seems like a losing proposition and a means of not honoring equity promises?  Perhaps, it's inadvertent.  Management can always replace the CTO if they are unhappy with progress or adherence to milestones (at which point you leave with what you have).  What's more common is a 1 year cliff, so that if they are unhappy in the short-term they can terminate without any equity participation.