4-yr vesting with a cliff works, and the concept should probably be left alone. The are plenty of other mechanisms to provide incentives to good people, for the business owner/founder to experiment with.
The four year vesting schedule doesn't make sense
41–47 of 47 posts
Re: The four year vesting schedule doesn't make sense
#42As someone with his not yet successful company, I am against 1-year cliffs. I believe in the 6-month cliff and am considering dropping it to 3 months. When I make a poor hiring decision, I usually know within 2-3 months. A shorter cliff forces me to evaluate new-hires faster. No one needs 1 year to determine if a new hire was a good fit.
But it works both ways; there will be people who you like who decide not to stick with you . You want to minimize the number of outsiders who hold shares in your company. If you don't grok this, you need to talk to more experienced people; this has to be one of the top horror story themes in startupland. Also, stop kidding yourself. Evaluating startup team members is very hard. You probably have a longer ramp-up than…
I am very experienced. Re: the number of "outsiders" - not as big a deal as you might believe. Good lawyering helps.
Its better to be considerate and balanced. The cliff only exists to protect against bad hiring decisions, 6 months is plenty enough time to figure out that someone is a bad fit.
You are correct about shares not being a very good tool for motivating people. Your suggestions about salary or sign-on bonuses are actually worse because that takes away from the working capital.
Re: The four year vesting schedule doesn't make sense
#43Earlier quoted context omitted.
But it works both ways; there will be people who you like who decide not to stick with you . You want to minimize the number of outsiders who hold shares in your company. If you don't grok this, you need to talk to more experienced people; this has to be one of the top horror story themes in startupland. Also, stop kidding yourself. Evaluating startup team members is very hard. You probably have a longer ramp-up than…
>there is a huge class of bad hire that starts strong and decays rapidly. Exactly. Also, startups = growth. As you grow, the game changes and usually gets harder. Someone you hired to take you from 0 to X^10 customers may do an ok job in the first 4 months when you have to go from 0 to X customers but may be terrible at getting you from X to X^2 in the next 4 months.
That is laughable. Few, very few companies experience that kind of exponential growth.
Don't be a jerk and cut people off just before their cliff. Do the right thing and reduce the cliff.
Re: The four year vesting schedule doesn't make sense
#44Earlier quoted context omitted.
But it works both ways; there will be people who you like who decide not to stick with you . You want to minimize the number of outsiders who hold shares in your company. If you don't grok this, you need to talk to more experienced people; this has to be one of the top horror story themes in startupland. Also, stop kidding yourself. Evaluating startup team members is very hard. You probably have a longer ramp-up than…
I am very experienced. Re: the number of "outsiders" - not as big a deal as you might believe. Good lawyering helps. Its better to be considerate and balanced. The cliff only exists to protect against bad hiring decisions, 6 months is plenty enough time to figure out that someone is a bad fit. You are correct about shares not being a very good tool for motivating people. Your suggestions about salary or sign-on bonus…
You don't sound very experienced. I mean that factually, not as an insult. For what it's worth, I've been in "key" roles (lead engineering, founder, and m-team) since 1996; I've spent my whole career in startups. I am not making the horror stories up, and they've happened in places with extremely good "lawyering".
Re: The four year vesting schedule doesn't make sense
#45Earlier quoted context omitted.
>there is a huge class of bad hire that starts strong and decays rapidly. Exactly. Also, startups = growth. As you grow, the game changes and usually gets harder. Someone you hired to take you from 0 to X^10 customers may do an ok job in the first 4 months when you have to go from 0 to X customers but may be terrible at getting you from X to X^2 in the next 4 months.
That is laughable. Few, very few companies experience that kind of exponential growth. Don't be a jerk and cut people off just before their cliff. Do the right thing and reduce the cliff.
Deliberately firing people on the eve of their cliff is immoral. But the solution isn't to reduce the cliff.
Re: The four year vesting schedule doesn't make sense
#46Earlier quoted context omitted.
>there is a huge class of bad hire that starts strong and decays rapidly. Exactly. Also, startups = growth. As you grow, the game changes and usually gets harder. Someone you hired to take you from 0 to X^10 customers may do an ok job in the first 4 months when you have to go from 0 to X customers but may be terrible at getting you from X to X^2 in the next 4 months.
That is laughable. Few, very few companies experience that kind of exponential growth. Don't be a jerk and cut people off just before their cliff. Do the right thing and reduce the cliff.
>Don't be a jerk and cut people off just before their cliff.
Saying that it sometimes takes more than 6 months to really evaluate new hires in specific roles is not the same as saying let's cut people off just before the cliff.
>Do the right thing and reduce the cliff
It is not clear at all that reducing the cliff to 6 months is "the right thing".
Re: The four year vesting schedule doesn't make sense
#47Earlier quoted context omitted.
I am very experienced. Re: the number of "outsiders" - not as big a deal as you might believe. Good lawyering helps. Its better to be considerate and balanced. The cliff only exists to protect against bad hiring decisions, 6 months is plenty enough time to figure out that someone is a bad fit. You are correct about shares not being a very good tool for motivating people. Your suggestions about salary or sign-on bonus…
You don't sound very experienced. I mean that factually, not as an insult. For what it's worth, I've been in "key" roles (lead engineering, founder, and m-team) since 1996; I've spent my whole career in startups. I am not making the horror stories up, and they've happened in places with extremely good "lawyering".
There are always people with different experiences to learn from.
That said, 1 year cliff is an arbitrary period of time. 6 months is an arbitrary period as well.
Your statement about experience is fine. I have my own collection of experience.
In my experience, forcing a fit/retention decision about a new hire to be earlier is a good thing. I do this with a 6 month cliff.
When I look at the people I have had to fire, I always saw the handwriting on the wall by the 2nd-3rd month.
A 6-month cliff gives me and them a chance to correct the issue.
Yes I could do this review process with a 1-year cliff. The 6-month cliff makes sure the issue is addressed consistently early after a new hire joins.
So if after 6-months I know I want to keep the person, why not say it with a stock plan?
Conversely, if the goal is to reduce the number of outsiders with stock:
* do you then support a 2-year cliff?
* a 5-year vesting schedule?