Equity

Vesting for part-time partners

Kris Braun Co-founder of KidsWifi

April 7th, 2013

I'm adding someone to my team who will start with as little as 1 day/week, which is actually all I need from them at this stage. Both of us are interested in seeing them come on full-time with significant responsibility within a year if the business justifies it and the relationship proceeds as expected. They're willing to work for equity and that's my preference, too, both because of cash flow and my desire to see them become vested in the company.

Have others structured vesting for part-time/variable-time partners? I'm thinking I'd like something like this: 50,000 shares vesting evenly of 750 workdays (i.e 3 yrs full-time). That way, if they only do 1 day/wk for a year and leave, they only walk with less than 3,500 shares, but if they come on full-time in 6 months and stay they fully vest in less than 3.5 years.

Anyone else done something like this, or see problems with it?

Thanks,
Kris

Eric Galen Partner at Hertz Lichtenstein & Young LLP | Venture Catalyst at Membrain Ventures

April 7th, 2013

Hi Kris - Subject to any option plan or similar document you may have, you can structure vesting of options fairly creatively.  In your description above, do you want a certain number of options to vest upon every day of work, and for the person to log the time worked?  

You could also do something like this: "For this phase of the company, I expect you to work 1 day/week without cash compensation.  For your work, I will grant you ____ options in the company, to vest monthly over 4 years, subject to a 6-month cliff (to give us time to start working together to make sure this works for us).  If and when your engagement with the company changes (i.e., when you will work more than 1 day/week), we can revise the agreement, increase the options, and so forth."  

However, if you think that this person's work schedule will change often (i.e., 1 day/week for a month or two, then two days/week for a month, then back to 1 day/week), then simply specifying a set number of options for each day worked (perhaps with a cap, and always upon a mutually agreed upon work schedule) might make more sense.   

These are just some initial, informal thoughts - if you'd like to talk in greater depth, feel free to email me.  

Eric F. Galen
Attorney + Entrepreneur
efgalen@gmail.com

Brian McConnell

April 7th, 2013

This makes sense to me for all founders because this is often the root of disagreement about fairness in equity allocation. That said IANAL so talk to an attorney. B

José Ordoñez Senior Lab Manager at Tintri (QA/Support/IT/Virtualization)

April 7th, 2013

I would hope that if I did a deal like that with someone, that if and when I went Full Time, the past 1 day a week would be accelerated to as IF I were full time back then. That would make it seem fair for me but then again, I'm looking at it from an employee's point of view vs employer.

Kris Braun Co-founder of KidsWifi

April 7th, 2013

I had also thought about an acceleration clause. Again, would be interested in hearing if that's been used in practice.

Nancy Lush Senior Executive, software product development and healthcare industry

April 7th, 2013

Hi Kris, I used to know a Kris Braun many years ago. Did you ever work at Raytheon? Nancy Stobbart Lush

Kris Braun Co-founder of KidsWifi

April 7th, 2013

Hi Nancy -- must have been another. There is a Raytheon office in town here (Waterloo), but I haven't worked there.

Michael Barnathan

April 7th, 2013

I've used the same terms I'd otherwise use (I don't normally include acceleration), but with the vesting time in logged hours rather than chronological days. You don't want to vest a part-timer in days - they'll accumulate without doing anything, and then you'll probably have to fire them at some point.

Kris Braun Co-founder of KidsWifi

April 7th, 2013

Thanks, Michael -- that's my intent, thanks for clarifying the language around logged hours.

Scott Durgin Founder & CEO 440labs

April 7th, 2013

I've found a combination of both vesting based on time/pro-rated days coupled with milestones and/or deliverables - especially in the initial term, have proven very useful. By definition part-time folks do not have your business as their top priority, as such finding ways to create clear alignment on goals is very useful. Maybe this person's role is more straight-forward but if not getting clarity up-front with vesting terms is useful.

James Bond CTO at SupplyBetter

April 7th, 2013