Can CEOs issue stock to themselves?

echojason@gmail.com'

JASON LEMKIN

Let me answer a variant of the question: as CEO, can you get more stock later if you raise money from outside investors?

The answer is yes, often. At least some.

Founders as a group get diluted by each financing round and by each new hire with an equity grant. That’s just how the pie works. It can only add up to 100%.

But for a CEO, there is a floor. Most VCs always want the CEO to have a material stake in the company. So you’ll see if a founder remains CEO for a very long time, and dilution is substantial … they almost always get additional grants of some amount 4–5 years down the road.

These new grants generally start vesting from scratch, often over a long period of time.

If you own 20% as a founder-CEO, don’t expect any more grants. But if dilution takes you down to <=4% for the CEO only (not the other founders, fair or not), and the VCs still want you to be CEO … you’ll get another grant more often than not. If — you stay as CEO.

View original question on quora

Published on May 9, 2018
Share This