Dear SaaStr: Once Your Equity Vests In a Startup … Why Stick Around?
It’s an interesting and subtle question, especially these days in the Bay Area, where many barely stay 1 year to their cliff, let alone the full 4–5 years to vest. Even employees at OpenAI often leave in less than 2 years.
For founders, there are at least four incentives to stay:
- If you own say 10% of a company, it really doesn’t matter if you own 11% or 12% or 9%. You are strongly incented to make that equity worth something. If you can add material value to the company, you should stay.
- Legacy. Once you are gone, it’s not yours anymore.
- More grants. They often are immaterial, but more grants can come over time.
- The company will do worse without you. I almost always see a start-up struggling when its founding CEO to CTO leaves. Almost always. The new guy never knows the product, the customers, the market, the needs, and the Why as well. Never.
For VPs and folks that own say 1%+, the incentives are similar, just a bit less so. But as a VP, if you have 1% of a company that can IPO, stay as long as you add value.
For strong individual contributors though, it’s toughedto stay > 4 years without either a promotion path or a “re-load” grant.
As CEO, consider re-loading your top performers every 2 years or so with new grants that vest over 4–5 years. That way, they’re never fully vested.
But if you do this for every employee, you run out of shares. That’s the tough part.
But at least give new grants to your top 10% employees every 2 years, top them off, with new 4-5 year vesting schedules.
That helps.
