Vesting founders’ stock is not a one size fits all solution for entrepreneurs in Idaho and California (see previous post for details about vesting founders stock). Founder’s must also consider something called “acceleration”. Acceleration allows the founder to get extra vesting in some situations; usually upon termination, departure from the company, or change of control.
One type of acceleration occurs when a founder is terminated without cause or constructive termination. First, it is important to note that it is very difficult to terminate someone for cause, so termination will likely result in the shares being vested. This type of acceleration is not advised for founders who have not worked with each other before. If, for some reason, a founder needs to be forced out of the company, acceleration upon termination without cause or constructive termination would allow the departing founder to receive all their stock at once. Once this occurs the departing founder departs with significant equity, and probably control, in the company.
Another type of acceleration can occur upon change of control. This, however, can be detrimental to the company because a founder who receives all his stock options upon a change in control of the company often is disincentivized from continuing to work for the new leadership. The company may need to offer more stock options to incentivize this person to continue working.
The most common form of acceleration is “double-trigger” acceleration. This type of acceleration occurs when there is a change of control within the company (such as a merger), and the founder is fired after the change of control. Usually, the constructive termination or termination without cause must occur within twelve months of the change of control.
Acceleration can occur on different terms. For example, vesting can be accelerated 100% after twelve months or 12 to 24 months can be accelerated. That is up to the founders and corporate leadership.
