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Comment by ivankirigin | Hacker News Reader

This doesn't sound like vesting, but a list of milestones to reach before granting the stock. That is a horrible idea.

Any list of milestones you draw up when you start a company is likely to contain things you mistakenly thought would be important, and omit things that turned out to actually be important. Doesn't sound very workable to me, agreed.

Even if things are important, and the person executes well, and that business unit could get crushed by something unforeseen. To align interests, employees should have the whole company in mind, not just their personal goals to get equity.

Precisely. So the right solution is vesting, which is a way to say:

a) today we both accomplished only 5% of all the work that needs to be done (that's Seth's point of view)

b) there are many things that still need to be done (still in line with the article)

c) we can't predict what else will be important, but we'll work on whatever needs to be done (that's where vesting beats Seth's proposal)

This is why I find corporate HR "goal-setting" to be such nonsense. You set a bunch of goals, but then you have real work that needs to get done, that is probably completely different from what you thought it would be. At the end of the quarter/half/year, you look back at your goals and say wow, I didn't accomplish any of that! But you were still productive, in completely unexpected ways. The future is funny like that.

I think this depends on how you implement it. I've been a part of several startups that have issued shares to founders on Day 1, and every single time issues have arisen down the road.

* The partners were equal at the beginning, but down the road, their value and contributions weren't equal

* Passive partners were given the same share as active partners

* People were brought on out of loyalty, not because of their value going forward

All three of these problems can lead to instability and conflict.

Partnering is serious business, and it's important to do it right. If people are bringing money to the table, it's relatively simple - value the company and issue shares. But when a company has no value, or if you aren't even sure where the company will go, it's important to vest ownership progressively, based on contribution. Not to say that this is easy, but it's better than just issuing everyone 1,000,000 shares at the concept/seed stage.

Fire people that are passive. Grant more options to those that deserve it. Don't hire based on loyalty.

What about the large spectrum of contributions between "passive, deserving of dismissal" and "top-3 contributor"? This seems a little too black and white.

Ideally, people are vesting on a share of stock proportional to their contribution. That's all I mean. If people are "passive" compared to what they are expected to do, they shouldn't be there any more.

Some investors are passive, giving money and doing little else. They don't vest and their roll is clear.

My comment is a bit black and white, but was commenting in the context of the thread: employees getting stock and expected to contribute proportionally.

It does sound like a bees nest of problems.

I much prefer just splitting 50/50 and having both founders kick as much ass as possible. This does force you to be able to rely on your cofounder, but that is probably is a good idea (and unavoidable) anyways.

The bigger problem than unfairness is that if you split 50/50 between two founders, you're screwed when you want to bring a third person in to do partner-level work.

That would be a tough situation, with no great solution.

Am I wrong in thinking you either bring in people from then on as employees?

I can't picture bringing on a 3rd and giving them a full founder stake down the road, and the middle ground is very tough.

Not allowing yourself to bring in key contributors in the future is an awfully big handicap to accept.

Allocating equity from a large pool, vesting and granting to the original founders as time goes on, and leaving a lot of headroom for future contributors seems like the right play.

If I am giving someone equity from an equity pool - I wouldn't consider them a founder. But that may just be semantics. Bringing in another founder down the road could work - it would just be a non-trivial decision to make regarding the split. Which slightly differs from what I originally, but I didn't mean to say I would completely rule that possibility out.

I definitely agree if you want to get and retain good people, having headroom in your equity pool is important.

You mention that you "prefer" this. IMO, this can never work, but I'm curious how/where it's worked successfully for you that you prefer it.

What if you realize that you need to add more executive-level people or even just regular employees to the company, or raise money?

I was referring to the founder split in the company. Providing an employee option pool or raising funds would equally dilute the founders.

you are more right (I bought up vesting below). Hopefully hackapreneurs reading this thread will ignore SG and take on the comments instead.

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