What are typical vesting schedules and terms for founders after an acquisition (ie, negotiated by the acquirer) in internet startups?

The “post-acquisition” vesting periods have lengthened over the past years.

Acquirers these days typically want key founders to stay at least 2 years, and often 3.

This can often include “reverse vesting” of shares or other holdbacks that retain a significant amount of consideration (usually 20%+) unless the founders stay 2–3 years.

Many corp dev departments these days want 40% of the founders’ deal consideration one way or another to be subject to staying. This can be a combination of stay bonuses, re-vesting, certain escrow provisions, earn-outs, revenue milestones, as well as carrots like new equity grants, cash retention bonuses, etc.

Selling these days isn’t a ticket to retirement. You usually gotta stay. But sometimes it is a ticket to rest-and-vest. The conditions vary.

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Published on March 9, 2018

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