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Should Founders Have Longer Vesting Schedules?
A common founder dilemma is how long their vesting schedule should be. Most founders currently follow a 4-year vesting schedule, similar to employees, but some investors are pushing for longer timelines to align with the full startup journey. Peter Walker shares the latest data from Carta:
4-Year Norms vs. Reality: While 4-year vesting is standard, data shows many startups are still raising early rounds by the end of this period. Fully vested founders at such an early stage may face pressure from investors to re-vest as a condition for new funding.
The Rise of Re-Vesting: Investors often require founders to re-vest over additional years to ensure long-term commitment. Typically, this involves extending vesting for another 4 years, effectively incentivizing founders to stay and grow the company.
Different from Employees: Founders argue that unvested shares shouldn’t be treated like employee equity, as they usually hold larger stakes and contribute more strategically. Still, investors see re-vesting as a way to minimize “dead equity” from departing founders.
✈️ KEY TAKEAWAYS
While standard 4-year vesting schedules are common, many investors are advocating for longer vesting or re-vesting, aiming to keep founders committed through critical growth phases and reduce the risk of dead equity.
Seed Stage Startups Now as Mature as Series A in 2014
Jackie DiMonte’s data shows that startup maturity at each fundraising stage is on the rise. Seed-stage companies today are, on average, as old as Series A startups were a decade ago. This trend may reshape investment behaviors, especially as technological advances might reduce the need for early-stage funding.
Age Rising Across Rounds: The average startup age at Series A has hit four years, and for Series B, it’s now over six years—both marking a shift from earlier fundraising timelines.
Bigger Round Sizes: Round sizes continue to grow as startups stretch out the time between fundraises, reflecting a strategy of achieving more milestones before seeking additional capital.
AI’s Potential Impact: As AI adoption lowers the cost and complexity of building software, companies may delay fundraising further, which could encourage multi-stage investors to enter pre-seed rounds and increase institutional participation at earlier stages.
✈️ KEY TAKEAWAYS
Rising startup maturity across funding rounds could drive institutional investors further into early stages, as slower burn rates and tech advancements like AI prolong the time between raises.
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