This is a new concept to me but comes from an entrepreneur who is working hard to build a business and finds that half of the founding team of six have taken an early bath with careers elsewhere but still keep most of their stake.
When we invested, we put rules in place to force leaving founders to sell their shares. But as this also applied to the key founder, the rules were watered down but now come to haunt him as it restricts his ability to reward people building the business for the future.
Of course the founders who leave should be able to retain a small stake, but the majority of their stake should be effectively transferred to the option pool to reward current staff. The options would vest over time to ensure that those that stay and contribute get the rewards.
A great name – Founders’ Tax – but painful for those who stay behind for the hard yards!
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