Why reverse vesting matters to a first-time founder
Without it, a co-founder who leaves after a few months can keep a large block of shares while the people still building the company carry the work. That dead equity makes later fundraising harder, because investors expect founders’ ownership to reflect continued commitment and often insist on vesting before they invest. Agreeing reverse vesting at the start, while everyone is aligned and nobody is leaving, is far easier than negotiating it in the middle of a dispute.
Examples of reverse vesting
You and your co-founder each hold 50% from the day the shares are issued, and you are building the first version of your app together. You agree that both blocks reverse-vest over four years with a one-year cliff, and you sign that with the split. In month eight they leave. The agreement may require the unvested shares to be transferred to the company or another permitted buyer at the agreed price, subject to applicable law. That arrangement is the reverse vesting. Without it, they would keep the full 50% while you kept building.
Common misunderstanding
Many founders assume that once shares are issued in their name, nobody can take them back. Reverse vesting changes that: the articles or shareholders’ agreement can give the company or other holders a right to buy back unvested shares when a founder leaves. It also does not replace a vesting cliff. The cliff usually sits inside it, so nothing vests until the cliff date and the unvested remainder stays subject to the agreed terms.
When to use it
Use it when founders receive their shares at the start rather than options over time. Define the vesting schedule, leaver events, permitted buyer, and price with jurisdiction-specific legal advice. Sign it with the split, before anyone leaves.