Is founder reverse vesting standard practice? Avnish Bajaj, Founder & MD, Matrix Partners India & Rajinder Balaraman, Director, Matrix Partners India, decode how we think about this at Matrix Partners India.

Rajinder:

Investors often ask for founder reverse vesting, is this standard?

Avnish:

Yes, it is and if your investor is not asking you for it, please ask them to ask you for it. This is something that we have invested in so many of these experienced founders lately. So the one who’ve seen it before, get it, they don’t even ask for it, in fact I’ve had people say that ousko 4 saal ka 5 saal kardo, reverse vesting.

By definition, just to define it reverse vesting means, your stock is not your stock, until you have been there that long. It is not just for the main- it is for all founders. You know sadly that not all founder relationships workout. We’ve had a number in our own portfolio and it’s a well know fact. 3rd to 40% will have some level of founders – leaving not on bad terms necessarily, just peoples path diverge.

In that situation you are going to have to bring in somebody else for that, where will you get that equity from? Are you going to finish off your ESOP pool for it? Founders reverse vesting is very standard, in my view it’s in the best interest of the founders and the best founders actually understand that.

For more on this topic,gohere.