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Comment by Alex3917 | Hacker News Reader

Just to emphasize this, your equity should be vesting even if you're the single founder of a bootstrapped company.

There are often weird cases in startups where you need to negotiate against yourself, and it's going to be hard to convince a disinterested third party that you're acting in an equitable way unless you're putting a framework in place from the beginning to value the sweat equity you're contributing. Having a vesting schedule will give you leverage in the future, even if it doesn't seem like it's doing anything at the time.

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This is nonsense. If you have a solo bootstrapped company that has any chance of making revenue or providing you income in the nearish future (which is what boostrapped means) then you should use the company structure that offers the most favorable tax consequences and worry about all these hypotheticals if and when they happen.

Disagree. Just because you start bootstrapping doesn’t mean you won’t change your mind one day and take on some investment. Put yourself on a schedule and give yourself options when it comes to funding.

Just because you have an “obvious” path to a sustainable business doesn’t guarantee it will be big enough or fast enough to meet your vision or the demand when you find it.

Not every restaurant starts out selling sandwiches on a food cart.

I'm sure you're way more experienced with this, so I'd love it if you could break this down for me a little bit more. Because as the solo founder of a bootstrapped company, this sounds absolutely ludicrous to me.

If I'm the only one on the cap table and half my equity is not yet vested, who does it belong to if I "leave the company"? And in the event that I run into a bizarre situation like the one you hint at, why can't I just setup vesting at that point?

> If I'm the only one on the cap table and half my equity is not yet vested, who does it belong to if I "leave the company"?

So that's a moot question. The assumption here is that even if you're currently a solo bootstrapped founder, you still want the optionality to hire people and/or raise money in the future. (Because burning your ships aside, you generally shouldn't give up free options.)

So then you run into issues like figuring out how to compensate yourself for money you've invested in the business. And since most businesses fail, by definition most businesses aren't worth anything after four years. Which means that if some but not all of the team is still working on the business, then you need to figure out how many shares to re-up yourself in the situation that the business isn't worth anything or is worth very little. If there are other people on the cap table at that point who have put work or money into the business then you need to figure out what's the equitable amount of dilution they should take, which is already difficult enough as is and would be even harder to do without having some historical record of vesting over time. This isn't even that uncommon, I've talked with multiple YC companies that have gone through this and who are now on their way toward being successful.

I may just be really tired and not understanding, but I think we're talking past each other about two different things.

"Solo founder bootstrapped company" sounds to me like "90% of small businesses", and I'm pretty sure virtually none of them have founder vesting, and yet they manage to hire people without the business owner having to vest their shares. Do you just mean in the case where they're going to issue shares to employees? So if I've been running this company for a couple years and I hire someone that I want to compensate with equity (which would be pretty unlikely, given that I think that's generally a crummy deal for both of us), why exactly can't I set them up on a normal vesting schedule?

Similarly, I suspect VCs are perfectly willing to invest in teams where the sole founder didn't previously have vesting setup. Indeed, I'd expect that's nearly always the situation.

So if I want to raise money, why can't we work out a vesting schedule at that point, which I suspect is how it goes 99% of the time that investors want solo founders to setup vesting. They weren't vesting at all before then, because, why would they? Doesn't make any sense.

This seems a bit like buying life insurance when you have no dependents, because you might get married and have kids later. Yeah, so get the life insurance then. In the meantime, who is getting that money if you die?

> So if I want to raise money, why can't we work out a vesting schedule at that point

You can and you'll have to work that out with your investors even if you had a pre-existing vesting schedule. But if you already have a pre-existing vesting schedule then that provides a much stronger anchor for the negotiations rather than just walking in there and saying what you think is fair or waiting for the investor to say what they think is fair. It's the same reason for giving yourself double trigger accelerated vesting in your stock purchase agreement. It doesn't (usually) legally mean anything because it needs to be re-negotiated anyway with the company that's buying you, but it provides an anchor for negotiations.

It also doesn't take any work and doesn't cost anything. And especially at the early stages where a lot of what determines the valuation of your company in an investment scenario is how much time the investors think they're going to need to spend babysitting you, I don't see any downside in erring on the side of running things in a professional way. And if you can show that you're capable of running things in a professional way, people will be more likely to defer to how you want to run the company.

> It also doesn't take any work and doesn't cost anything.

To be honest, I think that if you're a solo bootstrapped startup founder, pre revenue, pre employees, pre investment, then any second you spend on anything other than getting to product market fit is a waste.

I've seen too many companies from the inside that were very proud about how well they had done, and I quote, "their legal homework", before having gotten to anything even vaguely resembling product market fit. None of them are around now.

And to add a personal anecdote: my cofounder and me began a vesting schedule on our first investment (an accelerator), and that went fine.

Re: life insurance

I think this is fairly common, at least for employer sponsored insurance which is buy within six months of starting or forgo forever because of adverse selection effects.

As for the last part, mine goes to my siblings if I die.

Employer sponsored life insurance is a little bit of a different beast, I think.

And it wouldn’t make sense to buy life insurance to go to a non-dependent. You’d statistically be better off just paying them the premiums.

> This isn't even that uncommon, I've talked with multiple YC companies that have gone through this and who are now on their way toward being successful.

That they are YC companies by definition means they are not solo bootstrapped companies, since YC involves raising outside funding (not to mention they aren't made by solo founders).

I agree a vesting schedule is a good idea for all companies, as it makes it easier to bring on more founders or raise outside funding in the future but it's definitely not necessary for a true solo bootstrapped company.

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