Deal Terms
Reverse Vesting
Last updated
Quick Answer
A structure where a founder receives all shares upfront but the company has the right to repurchase unvested shares if the founder leaves.
What it is
Reverse vesting gives founders their full share allocation immediately but subjects the shares to a repurchase right that lapses over time (typically 4 years). If a founder leaves early, the company buys back unvested shares at the original price. This is the standard vesting structure for founders.
In Practice
Both co-founders received their 40% stakes at incorporation with 4-year reverse vesting. When one left after 18 months, the company repurchased 62.5% of their shares at $0.001/share.
Operational context
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The term is tied to a real workflow, not just a definition.
Ownership, timing, and evidence are clear.
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Why It Matters
Reverse vesting protects both co-founders and investors from a founder leaving early with a large equity stake they didn't earn. It's a standard requirement in VC-backed companies.
VC Beast Take
Reverse vesting is the co-founder insurance policy. Nobody wants to think about their partner leaving, but everyone is grateful for the protection when it happens.
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Frequently Asked Questions
What is Reverse Vesting in venture capital?
Reverse vesting gives founders their full share allocation immediately but subjects the shares to a repurchase right that lapses over time (typically 4 years). If a founder leaves early, the company buys back unvested shares at the original price. This is the standard vesting structure for founders.
Why is Reverse Vesting important for startups?
Understanding Reverse Vesting is critical for founders navigating the fundraising process. It directly impacts deal terms, valuation, and the relationship between founders and investors.
What category does Reverse Vesting fall under in VC?
Reverse Vesting falls under the deal-terms category in venture capital. This area covers concepts related to the financial and legal terms that define investment agreements.
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