VDR Ch. 4, Part 2: Vesting & Option Pools
August 1, 2017 | By Vela Wood
Office Hours is a podcast hosted by Vela Wood venture attorneys Kevin Vela and Aaron Terwey covering general issues related to small businesses and startups. Venture Deals Review is a series of Office Hours episodes discussing the book Venture Deals: Be Smarter Than Your Lawyer and Venture Capitalist by Brad Feld and Jason Mendelson.
In this episode, Kevin and Aaron review “Chapter 4: Economic Terms of the Term Sheet” and discuss why venture-backed startups must vest their equity, why you shouldn’t give employees Restricted Stock Purchase Agreements, how to get VCs to agree to a smaller option pool, and the difference between full ratchet anti-dilution and weighted-average anti-dilution.
You can find definitions and examples of terms found in the book and this podcast in our Venture Glossary.
- 4 Years with a 1-Year Cliff
- Broad-Based Weighted Average
- Cram Down Round
- Down Round
- Exercise Price
- Exercising Stock Options
- Exit Event
- Fair Market Value
- Fully-Diluted Basis
- Full Ratchet Anti-Dilution
- Incentive Stock Option (ISO)
- Key Employee
- Narrow-Based Weighted Average
- Non-Qualified Stock Option (NQSO or NSO)
- Option Plan
- Option Pool
- Ordinary Income Tax
- Par Value
- Post-Money Valuation
- Pre-Money Valuation
- Price Per Share
- Repurchase Option
- Reserved Shares
- Restricted Stock Purchase Agreement (RSPA)
- Reverse Vesting
- Right of First Refusal (ROFR)
- Stock Options
- Term Sheet
- Vesting Schedule
- Weighted Average Anti-Dilution
- Do you really need that much money now?
- Hiring Your First Employees
- How much equity should I grant to advisors?
- Negotiating Like a Pawn Star
- Silicon Valley Review S4, Ep38: Employee Handbooks & Terminating Employees
- Silicon Valley Review S4, Ep36: Key Man Insurance v. Key Holder Clauses
- Silicon Valley Review S4, Ep32: Assigning IP, Vesting Schedules & Spending Investor Money
- Silicon Valley Review S4, Ep30: Cocky CEOs, Ex Co-Founders & Terms of Service
- The 50-50 Equity Split(up)
You’ll want to bookmark Venture Glossary as a quick reference for navigating the venture world. We love talking about startups, so follow us on Twitter. And feel free to email us at firstname.lastname@example.org with any comments or suggestions!