Structuring early company equity allocations and corporate cap tables
Early company equity structures define ownership rights, vesting terms, option pool buffers, and dilution math across capital capitalization tables.
double trigger
Meaning
An acceleration mechanism in equity compensation plans requires two distinct events to occur before a recipient’s unvested shares or options become fully vested. This structure, known as a double trigger, protects both the company and the employee by ensuring that equity is only released under specific, pre-defined conditions of disruption. The mechanism usually combines a corporate change of control with the involuntary termination of the participant’s service.
Acquisition Protection
Retention of essential talent during a merger or acquisition remains the primary incentive for utilizing this vesting style. A double trigger prevents the immediate acceleration of equity upon a buyout, ensuring that the acquiring entity does not lose the entire management team the day after the transaction closes.
Severance Security
Economic protection for the employee occurs if they are dismissed without cause following the corporate transition. The double trigger ensures that if the new management team terminates the founder or senior executive within a specified window, their equity vests immediately. This setup compensates them for the sudden loss of their role while avoiding an unearned windfall if they choose to leave voluntarily.
Vesting Velocity
Vesting schedules normally proceed on a monthly or quarterly basis over several years. Implementation of a double trigger alters this default velocity only when both conditions are met, leaving the standard schedule intact under normal operating conditions.