Founder's Shares
Common shares issued to founders at incorporation, typically at a fraction of a penny each.
Definition
Founder's shares are common stock issued to founders when the company is incorporated, typically at par value ($0.0001 per share). Founders usually receive millions of shares at this negligible price, representing their initial ownership of the company. These shares typically vest over 4 years to ensure founders remain committed. Founder shares do not have the special rights of preferred stock.
Why it matters
Founders start with the largest equity stakes at the lowest cost. As an early employee, your equity economics are fundamentally different: you receive far fewer shares at a higher price (the 409A value). Understanding this gap helps set realistic expectations.
Example
Two co-founders each receive 4,000,000 shares at $0.0001/share, paying just $400 total for 80% of the company. A first employee joining 6 months later receives 100,000 options at a $0.10 strike price.