Cambridge Cluster

The terms good leaver/bad leaver normally applies to people receiving shares from an option pool.  If people leave the company then some or all of the share options can be cancelled.  But what happens when a founder leaves?  Usually the good leaver/bad leaver provision does not apply to shares already issued when the first angel round is raised.

This can have unfortunate consequences.  In one company I know of, there  is no agreement and two founders have left still owning some 30% together.  In another company, there is a clear agreement that if you leave early (say five years) then a part of your holding is cancelled.  The agreement is clear and there is little room or need for argument or protracted discussions - you leave early, you lose your shareholding.

Some will say that this is unfair on the founders.  It is tough but even tougher on those who stay to build the company.

Perhaps the business plan resource should include a “founders early bath” pool of amounting to 5% of the issued equity at the time which can be split between any founders who leave.  They get something from their input in the early days but leave the lions share for the people and investors who build the business.

People will have different views on this one but until you have jumped off the fence and put your money in, it is easy to talk.  It is so frustrating when people walk out when things are tough and start calling the shots from the side.  Moreover, they make it more difficult for the people who stay to build the money and raise funds.  As most of the Cambridge Cluster companies are funded by large syndicates, investors have the option to keep investing or not but rarely have a large stake in the business.  When you have founders with 20% stakes taking “life-style” decisions it is very frustrating.  They never seem to leave if all is going well.  It does make you understand why banks ask for personal guarantees as they concentrate the mind.