Vesting On Founders Stock - What Is It?

Founders stock, a form of stock (i.e., common stock) that comes with voting rights, is the equity interest that the founders of a company receive around the time the company is formed. Venture capitalists will often insist on “vesting” - if the founder leaves the company before the stock is fully vested, the company has the right to buy back unvested shares at the price paid by the founder (typically a very low price, close to nothing).

This is a way to protect against founders leaving a company after the investment money is in - and taking all of their shares with them. Vesting is often accelerated based on certain events, such as a change of control of the company or a termination of their employment by the company without cause.