The benefits of reverse vesting arrangements for high-growth startups were discussed in an article penned by Fasken’s Emerging Technology and Venture Capital group, and published in the Vancouver Tech Journal.
Reverse vesting arrangements involve an equity structure where a founder initially receives full ownership of their allocated shares, but these shares are subject to a vesting schedule. This means that the company retains the right to repurchase unvested shares at a nominal price if the founder is no longer involved with the company, ensuring that each founder earns their equity over time, based on their continued involvement.
The article’s authors outline key benefits of this structure such as aligning founders’ incentives with those of the company, attracting sophisticated investors, and achieving desirable tax benefits.
“Reverse vesting arrangements are a powerful tool for high-growth startups, ensuring alignment among founders, protecting the company’s equity structure, and creating a foundation for long-term successˮ, wrote the authors. “By taking the time to implement a fair and thoughtful reverse vesting arrangement, founders can build trust among their co-founders and investors and position their startup for sustained growth and investment.ˮ
Learn more about Fasken’s Emerging Tech and Venture Capital group here.
