Founders

A “founder” is an individual who starts a startup or joins one or more other founders to become co-founders for startup in its early stages. An employee that joins an established startup is not considered a founder per se, but there are also not hard and fast rules regarding when a person who joins a startup could no longer be considered a founder. Perhaps the best guidance is that the person must join early in the startup’s development to be considered a founder.

A founder could be an investor or a person who has helped to start-up a business with his or her own financial investment. A person who may have contributed to the creation of the startup with his or her intellectual property through design, idea and data could also be considered a founder.

Along with the title of being a founder of a company may include many different benefits v. what an employee may receive. However, there are risks in various forms as well as great potential to amass valuable stock over time. A founder needs to makes great consideration to the outlook of their finances for at least one year, family support, effect on the career as well as the positive benefit of being a founder.

Founders usually receive stock which vests over time (called founders’ stock or restricted stock in the startup industry) and accept a reduced salary because they understand that the stock is their non-liquidated equity initially.

A notable difference between founders and employees is the amount of stock to be received. A founder typically receives at least 10% of the startup’s outstanding stock (and often 20% to 50%) and an employee rarely receives 10% or more regardless of the position he or she holds.