Obtaining "Equity" in a new startup company

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LMCane
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1:28p, 1/20/26
Any board members been offered equity to start working for a new company?

for your shares- do they have to be held for a minimum time?

do you have to constantly work for the same company for a certain number of years to be able to cash out?
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EliteZags
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2:35p, 1/20/26
AG
not sure what industry you're ref to but for medical device the standard is 4 years to fully vest, 25% vested after 1 year then vested monthly, if still working during acquisition/IPO then get auto fully vest- went trough that once and on year 1 with the 2nd
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topher06
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2:46p, 1/20/26
On board or on management team? Are these carry shares (probably called b units or b shares) in a private equity backed portco, or just a group of individuals starting a new company without a PE normal setup?
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Comeby!
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In reply to topher06 • 5:51p, 1/20/26
AG
Confused with this as well. Are you on the board or on the management team. Sometimes it's one and the same but in this cases you get your W-2 from them. Then it's just A shares if you write a check, B if you don't. Vesting varies by industry. 3 years typically in oil and gas, especially corporate.
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bmks270
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10:32p, 1/20/26
AG
Are you a cofounder?

Employee #1?

Employee #5?

#10…

C-level? senior? Junior?

Is the company backed by venture capital? Seed stage I assume of your an early employee.

Most venture backed startups give a lot of equity to early employees in the form of "Incentive Stock Options" or ISOs for short. These get special favorable tax treatment so make sure ISO (the ones that don't get favorable tax treatment are NSOs).

5-15% or more for C-level / cofounder like CTO as a first employee.

.5-2% for the first few handful of hires depending on role and seniority.

Standard package is 4 year vesting schedule.
25% vests after the first 12 months, then the remaining 75% is vested monthly over the next 36 months (months 13 through 48).

Get the contract reviewed by an attorney or advisor experienced in these types of contracts. There are a lot of details that need to in the contract.

Also, if you will be an early employee at a startup read up on "QSBS" and "83b" and "early exercise"

Of the company isn't publicly traded it might be hard to cash out the equity. Most startup equity can't be cashed out until an IPO or acquisition of the company. Some startups that go on to raise lots of money may have time their employees can cash out to new investors during a funding round.
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LMCane
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In reply to EliteZags • 11:03a, 1/21/26
EliteZags said:
not sure what industry you're ref to but for medical device the standard is 4 years to fully vest, 25% vested after 1 year then vested monthly, if still working during acquisition/IPO then get auto fully vest- went trough that once and on year 1 with the 2nd


thanks.

aerospace/defense industry

so if you leave the company in year three you get only 25% of the shares?

is there ability to negotiate on this or it is regulatory requirement?
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LMCane
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In reply to bmks270 • 11:05a, 1/21/26
wow nice. many thanks

I would be like employee 3 in the USA company but they already exist in Israel for three years with many employees.

their goal in opening shop in the USA is to win military contracts and get acquired by a major American defense contractor.

I would be not management but legal corporate compliance attorney.
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EliteZags
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In reply to LMCane • 11:30a, 1/21/26
AG
after the 1year 25% you get prorated monthly
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LMCane
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In reply to EliteZags • 12:49p, 1/21/26
EliteZags said:
after the 1year 25% you get prorated monthly

okay that is awesome

is that in a law or regulation?
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jh0400
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In reply to LMCane • 12:57p, 1/21/26
AG
It's dependent on company policy. I've seen the vesting go anywhere from annual on the anniversary of the grant to quarterly to monthly.
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MS08
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In reply to LMCane • 1:35p, 1/21/26
AG
Vesting guidelines are specific to the company. Should be and needs to spelled out in writing somewhere.
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Diggity
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1:56p, 1/21/26
AG
definitely something I want to rely on the wisdom of crowds about.
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bmks270
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In reply to LMCane • 3:14p, 1/21/26
AG
LMCane said:
EliteZags said:
not sure what industry you're ref to but for medical device the standard is 4 years to fully vest, 25% vested after 1 year then vested monthly, if still working during acquisition/IPO then get auto fully vest- went trough that once and on year 1 with the 2nd


thanks.

aerospace/defense industry

so if you leave the company in year three you get only 25% of the shares?

is there ability to negotiate on this or it is regulatory requirement?


If you leave in year 3 you would get number of months employed / 48 * total

If you are there 36 months you would get 75%.

Typical it's zero if you leave in the first year… then it's based on number of months after that. 4 years vest means the 100% is split over 4 years. Usually monthly so every month you are get 2.3%.

25% you get at 12 months, then 2.3% per month after that until it totals 100%
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bmks270
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3:18p, 1/21/26
AG
4 years vesting with 1 year cliff is what you might hear it referred to as, it's the most common arrangement.

I had a friend once get a 3 year vesting schedule with no cliff, meaning you start getting immediate vesting at a rate of 3.056% of the total per month.

The grant also spells out under which circumstances the grant can be cancelled or nullified. Like if you're fired for cause, what happens, what happens if you quit, what happens if the company is acquired, etc. make sure it doesn't have some claw back like you lose the options if the company IPOs.
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BiggiesLX
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In reply to Diggity • 10:51a, 1/22/26
Diggity said:
definitely something I want to rely on the wisdom of crowds about.


Any lawyer worth a damn should definitely seek legal advice from randoms.
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91Challenger
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12:56p, 1/22/26
AG
It can be different for every company. Just read the fine writing in the contract, and know that everything is negotiable. There is no law or regulation on vesting. It is entirely up to the founders.
"A is A”
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Comeby!
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In reply to BiggiesLX • 4:10p, 1/22/26
AG
BiggiesLX said:
Diggity said:
definitely something I want to rely on the wisdom of crowds about.


Any lawyer worth a damn should definitely seek legal advice from randoms.


Give the dude a break. I think the average Aggie is smarter than the average person and this board has some sharp people. Kind of like ChatGPT before ChatGPT.
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Thisguy1
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In reply to Diggity • 4:18p, 1/22/26
Diggity said:
definitely something I want to rely on the wisdom of crowds about.


Once you know who it is, all their posts make a lot more sense.
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Seven Costanza
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In reply to Thisguy1 • 9:36p, 1/22/26
AG
The most effort-intensive functionary in the industry.
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falconace
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In reply to LMCane • 8:21p, 1/24/26
LMCane said:
wow nice. many thanks

I would be like employee 3 in the USA company but they already exist in Israel for three years with many employees.

their goal in opening shop in the USA is to win military contracts and get acquired by a major American defense contractor.

I would be not management but legal corporate compliance attorney.


Glad you're asking simple legal questions but will be handling legal for them.
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Marauder Blue 6
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In reply to Seven Costanza • 9:10p, 1/24/26
AG
Seven Costanza said:
The most effort-intensive functionary in the industry.
Oil or strength & conditioning not work out?
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Deputy Travis Junior
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In reply to Diggity • 11:38a, 1/27/26
Diggity said:
definitely something I want to rely on the wisdom of crowds about.


Yes wondering if this is an elaborate troll. A compliance attorney asking a message board for advice on a document that we haven't read and that he apparently hasn't read either is a giant WTF mate!?
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