Initial Equity Split Terms in Early Ventures
Initial equity split terms assign ownership percentages and vesting conditions to align long-term founder incentive with realized contribution.
double trigger
Meaning
A contractual clause within equity acceleration provisions specifies two distinct sequential conditions that must both occur before unvested equity vests early. Under a double trigger arrangement, equity acceleration requires both a corporate acquisition and a subsequent termination of the executive without cause. This mechanism protects employees from losing unvested stock when a new owner terminates their employment, while preventing employees from receiving fully accelerated stock solely because an acquisition occurs.
Acquisition Protection
Single condition clauses vest equity immediately upon a change of control, leaving the buyer without advantage to retain lead executives. The double trigger model balances buyer retention goals with executive equity protection. If the acquirer retains the founder under equivalent employment conditions, unvested shares continue along their original schedule.
Should the buyer terminate the executive or materially degrade their role, the secondary mechanism releases the unvested stock immediately.
Executive Retention
Founders negotiating employment agreements seek this provision to ensure post-acquisition security. A standard double trigger protects against constructive dismissal, where an acquirer reduces responsibilities or cuts compensation to force a resignation. The clause defines constructive dismissal as an involuntary termination, triggering equity release.
Financial Impact
Incorporating this protection reduces friction during M&A negotiations by aligning buyer retention objectives with founder safety. The cost of this provision is borne by acquirers who must honor equity acceleration if they restructure management post-deal.
Restructuring Pre-Seed Stock Issuance Under Investor Acceleration Terms
Investor acceleration terms force pre-seed stock restructuring by converting outright common grants into milestone-restricted shares with explicit repurchase rights.