Meaning
Modification of an equity release schedule forces a participant to earn their shares again over a new multi-year period. This vesting reset typically occurs during a major financing event or after a merger to ensure the continued commitment of the leadership team. It defines the new timeline for the transfer of ownership from the company to the individual.
The reset is complete when the new period ends and all shares are fully owned.
Retention Objective
Investors use a vesting reset to lock in the founders for several more years after they have already vested their original grants. This ensures that the people who built the value stay to see the next phase through. It is a cost paid by the founder in the form of time.
Ownership Delay
A vesting reset pushes the moment of final ownership further into the future. For a founder who was close to being fully vested, this can feel like a setback in their personal financial planning. It changes the nature of their relationship with the equity.
Operational Impact
The psychological effect of a vesting reset can change how a founder approaches their daily work. Balancing this incentive with the actual desire of the individual is a delicate task for the board.
