I've co-founded four companies with seven distinct co-founders, raised angel and venture funding, and had two very successful exits. I've never had vesting for any founder at any stage, and never had cause to wish for it in hindsight.
There are advantages and disadvantages to founder vesting and they are situational. Recommending it as a default may very well be good zeroth order advice for beginners, but your position is way too strong.
A start on thinking about why it might not always be the best way to keep a team together is to look up the "israeli day care study".
Here, I’ll be the first to provide a perspective from the other “other” side of this argument. I am a founder who once had a vesting schedule with a cliff (one year). I built the first version of a venture backed company as the CTO, we had backing from investors you’ve heard of.
The product went live and was even used by some people. Eventually I ended up in a place where it was clear to me I disagreed with the direction of the business and the CEO leading it. I for one am glad there was a cliff.
Because I left and when I did my co-founders continued to work on that business. As far as I know they’re still at it.
That was over six years ago. The code I wrote is likely of VERY little value in the grand scheme of things.
The value I added in thoughts, ideas, advice etc. is probably about as valuable as people my co-founders have had several dinners with over the years at this point. If I had walked away with 1/3 of the equity that would have put the other two co-founders in a horrible situation and would have been completely unfair of me to do.
The cliff did its job. You vest to protect all parties and because it’s just the right thing to do. Take it from someone who walked off the “cliff”.
I’ve started multiple companies since then. Each has had a vesting schedule and a cliff for all founders.
Writing the MVP for that company's app was invaluable at the time. Without a working app, your cofounders would not own their company.
Leaving a startup is a personal decision that can be very rational; I don't criticize your decision to leave. I am critical of your understating your importance to the business. I think that 1/3 of the company would have been far too much, but 0% seems far too low.
Further, lots of people don't seem to understand the job changes.
Take cto. When it's founders and maybe an employee, cto is a full-time dev.
Then you get funded, and four months later the engineering team is 4-6 people. The cto is now a line-level manager who codes a bit. It's a completely different job.
Then you get the next round, and suddenly the cto supervises 2-4 line level eng managers and has to decide if (s)he wants to be cto or dir-eng, because those roles are about or have already split. This, also, is a completely different job.
At each step, it's a completely different job.
Your company needs to be prepared for founders who don't want, can't, or aren't good enough at the next step that is required of them. Because the job literally completely changes every 2 years. Or sooner.
I think you got lucky. That's great, and I'm happy for you. We could bicker about the odds. Maybe it's 60/40 in favor of you getting away without vesting? Maybe even 70/30? The first company I ever worked for, which also had a successful exit, didn't do vesting. It never occurred to any of us to be ruthless about it, and it happened that nobody left early anyways: they had gotten the team exactly right. Vesting wouldn't have made a difference. Maybe that's you, too?
Me, I've been working for small companies ("startups") since 1995. I've been on the founding teams of 5 of them. In all but 1 of them, key members of the team left at some point. In each of those situations, lack of vesting would have meant they left with a full share of the company, leaving everyone else on the team to work --- possibly for years --- for that person's equity. In one case, that's exactly what happened, only we didn't know it until the end.
That's a mistake I will never make again.
These are, I think, the very worst kinds of mistakes startup founders can make. The kind that don't really impact the company on a day-to-day basis and that you won't notice, until you're actually successful and finally at or near accounting for that success, and you realize you did something stupid that tolls the whole fucking enterprise. You might not be able to do anything to mitigate, you can't even bail from the company and do something different, you're never getting the time back, the damage is done. Vesting isn't the only mistake like this, and it's not the worst, but it's bad.
And for what? Does it somehow make you feel better not to vest? I don't get it.
(I don't pretend to understand Alex's logic about vesting as a solo founder but did not think hard about it either).
Obviously, yes, if you keep going back to the well, eventually someone will betray you. And vesting will make a founder breakup easier (if the company can survive without the founder, and if it hasn't already been long enough that they are fully vested, and if you couldn't have come to a negotiated agreement). And that's a good reason to do it. Another good reason is if your cofounders are already pretty mercenary and the vesting incentive actually makes a breakup less likely.
There are good reasons not to do it too. If you work with good and honorable people, who have kept their promises to other people in their life, and who have (incredibly valuable) reputations as honest people to protect, they are pretty likely to keep their promises to you too. (Don't forget to actually discuss these promises!) Unless you unnecessarily move the decision to leave into the category of "rational economic decision" by putting a price on it. (And four years later, when that price has decreased to zero?)
Another reason is that you might trust your cofounders more than your possible future investors (they have reputational incentives too, but you don't know them yet!), and prefer not to give the latter a possible avenue to steal the company from some or all of you.
Sometimes there can be tax tradeoffs, depending on what else you are doing.
As I said, it might be a good choice to have vesting in many or even most circumstances. Everyone should carefully consider it. But "always no matter what" is not good advice.
"Good and honorable" has nothing at all to do with it. When you run a company without vesting, you are explicitly telling the founders they have an unencumbered right to their share of the company practically without regard to when they leave. When they come back, 10 years later, what you have isn't a "betrayal", but rather a mutually-motivated disagreement, and one in which one side has a great deal of legal leverage. It's a nightmare scenario that has nothing to do with moral judgements, and exactly the scenario vesting is designed to eliminate.
The idea of starting a company that is predicated on not surviving a founder departure is weird to me.
If you think that what the corporate documents say is the only or most important possible form of commitment between founders, we probably have very different philosophies about business and probably life.
To give a related example, I've sold a company to an acquirer for whom the deal was extremely material, and for whom I was a very key employee, who tied me down for two years with nothing more or less than a promise and a handshake. They were smart: I was far less likely to leave during that time than I was after another acquisition where I had big golden handcuffs.
(Also, I have trouble understanding the "10 years later" scenario. Is the assumption that there's a founder breakup and... everyone just forgets about it and goes about their business? THAT sounds nuts.)
I didn't say anything of the sort. In fact, I said the opposite: I specifically imputed good faith to both sides and called it a disagreement. The departed principal believes their work to have been instrumental; the remaining team believes otherwise. Without vesting, the lone departed can kill the deal.
The "10 years later" example was not made up. Like I said, I've been a party to a "didn't think we needed vesting" scenario, and it's a mistake I won't make again.
I 100% believe you successfully managed a company that was built on handshakes. Like I said, you got lucky (if you'd prefer the alternate framing, say instead "we didn't get unlucky"). I have trouble understanding why you'd leave something like this up to chance; companies are (in most cases) many years worth of dedicated enterprise from multiple people, and deserve a few hours of de-risking by spelling the arrangement amongst principles out in writing.
I'm hardly alone in the belief that founders should vest; you yourself called it a "default"; I quoted Spolsky on it below; and it is, all else aside, certainly a norm in the US. I'm still waiting to hear why you wouldn't do this. Because it helps investors "steal the company" from you? If you raise VC, this debate is especially irrelevant, because while I believe you took funding for one or both of the companies you sold (as I believe all the experiences you relate), I do not believe you could today raise a round from an actual VC firm without taking on a vesting schedule.
I might not have time to continue this discussion.
Try this:
If standard vesting terms make you nearly indifferent to your co founder leaving, or to being fired, then they are perfect for you and you should definitely go for it.
Otherwise, you want some other kind of agreement with your co founders. It's not likely that the ideal agreement is one you can enforce through the weak economic incentives you can put in your corporate agreements (constrained by enforceability, tax considerations, what would totally freak out later investors or acquirers, etc). You will just have to rely on loyalty, integrity, etc. And it's fairly well known that adding weak but salient economic incentives to strong moral ones has a perverse effect. I don't think I can explain this any more clearly.
(And if you can't completely trust your partners, why worry about them leaving, but not about them colluding to fire you and repurchase a bunch of your stock? And isn't the prospect of a high stakes negotiation that could blow up your company a stronger incentive than losing some predictable fraction of equity?)
No matter what you do, there will be risks. I think what balance of risks is best depends on you, your partners, and your situation. We are in full agreement that you should address this issue, in one way or another, early.
(It hasn't been that long since I've raised money from a "real VC", but who knows? I'm happy to leave that out of the conversation)
What if I'm not "indifferent" to whether my cofounders stay, but also can't see into the future? What if I'd like the option to continue a functional company even if one or more members of my team decide that it isn't a fit?
Why am I more worried about this situation than the ones where my partners conspire against me to steal my stake in the company? Because the situation I'm describing happens all the time, and, as I mentioned upthread, easily happen even when every party is acting in good faith.
ps
I have a pair of friends who went in on a YC company together. The partnership didn't work out; one left to join and eventually lead another YC company, the other stayed. Both founders had strong, liquidity-event exits afterwards (within months of each other, in fact). Nobody foresaw the partnership failing, but this (super ultra common) eventually was handled by the book, and everyone won in the end. I'm, again, having a hard time seeing the net downside of vesting.
There are advantages and disadvantages to founder vesting and they are situational. Recommending it as a default may very well be good zeroth order advice for beginners, but your position is way too strong.
A start on thinking about why it might not always be the best way to keep a team together is to look up the "israeli day care study".