When I took on my first angel investor, I quickly realised that the financial infusion was only half the equation — the real work was in structuring equity and vesting so nobody woke up in six months wishing they'd done things differently. Founders often focus on valuation and the money on the table, but the tiny clauses in the shareholder agreement and cap table arrangements determine whether your company stays aligned or fractures under pressure. Here’s how I approach equity, vesting and governance to avoid disputes, drawn from experience and practical playbooks I’ve seen work again and again.
Start with a clear cap table and a shared mental model
I always begin by making a simple, readable cap table. It’s amazing how many disputes start from misunderstandings about percentages. A cap table should show:
For early-stage deals, I like to provide a small explanatory paragraph under the cap table to explain assumptions (e.g., “post-money includes a 10% option pool” or “SAFE converts at next equity round only”). Clarity here avoids the common “I thought I owned X%” fights.
Vesting for founders: default to fairness, not generosity
Founders’ vesting is often the most sensitive topic. My rule of thumb: impose founder vesting if any external capital or key hires are involved. Even if founders started the company together, circumstances change — and vesting aligns incentives.
Typical structures I recommend:
One of my early mistakes was refusing vesting because “we built it already.” That backfired when a co-founder stopped contributing; the company was stuck. Today I’m rigorous: even founders get subject to vesting when outside capital is introduced.
How to treat the first angel investor: rights, preferences and balance
Angels are typically hands-off but they often ask for protective provisions. I try to strike a balance — enough protection to make investors comfortable, but not so many rights that future fundraising becomes impossible.
Shareholder agreement essentials I insist on
When we draft a shareholders’ agreement I make sure it contains these clauses, and I encourage investors to do the same — transparency reduces surprises:
Vesting for options and early employees
Option pools create future conflict if poorly sized. I prefer establishing the option pool pre-money so founders aren’t unexpectedly diluted post-investment. Some key practices:
Acceleration details: when and how much
Acceleration clauses are emotional negotiating points. Investors fear founders walking away with too much unlocked equity; founders fear being stuck after an acquisition without exit proceeds. My approach:
Practical negotiation tips I use
Sample vesting table (simple)
| Entity | Shares | Vesting | Cliff |
|---|---|---|---|
| Founder A | 2,000,000 | 4 years | 12 months |
| Founder B | 1,500,000 | 4 years | 12 months |
| Option Pool | 750,000 | As allocated | Varies |
| Angel Investor | 1,250,000 (Preferred) | n/a | n/a |
This table is illustrative; tailor numbers and classes to your deal.
When disputes still happen — governance and communication
Even with great documents, interpersonal issues arise. I always set a governance ritual: regular board updates, a clear escalation path for conflicts, and a neutral adviser or mentor to mediate early. Often the difference between a dispute and a productive argument is how quickly parties can talk candidly about expectations and milestones.
Finally, remember equity and vesting are tools to align long-term incentives. If you design them with transparency, fairness and future fundraising in mind, you drastically reduce the chance of a destructive dispute. Money may be the spark that brings parties together, but governance and clarity are what keep them working toward a common goal.
