What is a Reverse Vesting?
Reverse Vesting
Reverse Vesting is a mechanism where founders own their shares upfront, but the company retains the right to buy back unvested shares at cost if a founder leaves early.
Why It Matters for Startups
Governs the legal rights and ownership distribution of the entity; configuring Reverse Vesting is critical for managing long-term cap table health and alignment during founder shareholder agreements and seed-stage investments.
Frequently Asked Questions
Q:How does reverse vesting protect a startup?
It prevents a departing co-founder from leaving with a large percentage of company equity, preserving those shares to recruit replacement talent.
Q:Does reverse vesting apply to common stock?
Yes, it is typically applied to founder common stock at incorporation or during early seed rounds.
Quick Facts
- CategoryLegal
- Key ApplicationFounder shareholder agreements and seed-stage investments
Coverage Trend12 Weeks
Related Startup Terms
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