The most important founder term is the vesting schedule. Before a financing, the founders often will own all of their shares in the company outright. Investors will almost always insist that, instead of the founders owning their shares, they earn the shares over time. The founders get to own the shares outright only after they "vest" - i.e., after they are earned. This is designed to keep the founders with the company, and prevent a founder from leaving and still keeping a big share of the company.

For founders, a vesting schedule is a tough pill to swallow. They've put in a lot of work to build the company, and to get investors interested. Why should they give up a bunch of their shares? The justification is that the first few months of work are nothing compared to the next few years that will be required to get the company to an exit. So, investors will insist on vesting to keep the founders fully committed to building the company.

The vesting schedule usually has the founders earn shares (the vested shares) based on the time they remain with the company, and lose any unvested shares if they leave. A typical vesting provision is four-year vesting with a one-year cliff. This means that, for the first year after the financing, the founders won't get any vested shares. At the end of year one 25% of the founders' shares will vest. The remaining 75% will vest in equal monthly installments over the next three years (years two to four).

Sophisticated investors will always insist on vesting, especially in early rounds. Here are a few ways to limit the impact on founders and get credit for the work they've already done:

Credit for Time Served. If the founders have been with the company for a long time-- usually over a year-- they can credibly ask to get some credit for the time they already spent with the company. This might mean straight vesting (with no "cliff") or having some of the shares owned outright and others subject to vesting.

Straight Vesting. Straight vesting, without a "cliff," prevents a founder from losing all of his or her shares, and means that vesting will start immediately. If you have a compelling reason for it, you can ask for straight vesting. For example, if the company is on the verge of launching a product, a lot of value is being created right away, so the founders can ask to get some return - i.e., vesting - right away too.

Consulting/Board Seats. Another reasonable request that shouldn't cause much friction is to allow the founders to continue vesting some portion of their shares if they stay with the company as board members or consultants/advisors. Investors may require less of the shares to vest based on the founders reduced role, but if the founder is still adding value, it's fair to give him or her some additional equity.

The second most important provision related to vesting is whether vesting will "accelerate" if the company merges or gets acquired - i.e., whether the founder will get some of their shares outright after a merger or acquisition. Founders should always have at least some acceleration, since there's a greater risk of termination by the acquirer.

Single Trigger: The most founder favorable term is "single trigger" acceleration. This means that all of the founders' shares vest immediately upon a sale. Most investors will push back, claiming that nobody would acquire the company without some guarantee that the founders would stick around. If you get this argument, suggest partial vesting on an acquisition with some shares still on a vesting schedule afterwards.

Double Trigger. The more common provision is "double-trigger" acceleration, which is less founder friendly but not unreasonable. It basically means that if the company is acquired and the founder is terminated "without cause" or quits for "good reason," some portion of the shares will vest upon termination. Good reason means a significant change in the founder's role, responsibilities, compensation or working conditions - e.g., location.

Hybrid. It's becoming a lot more common to see hybrid acceleration with some portion of the shares vesting immediately on an acquisition and additional shares vesting on termination "without cause" or resignation for "good reason." This can be a good compromise position for investors and founders, since it still gives founders an incentive to stay on after an acquisition, but gives them credit for getting the company to an exit, which isn't easy.

When setting up acceleration, the percentage of founders' shares that accelerate is heavily negotiated. 100% vesting is ideal, but rare. Getting more than 50% is considered a good deal for founders. Remember, even if you you don't automatically get all of the shares up front, you can still earn the remaining shares by staying with the company for the full term of the vesting schedule.