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.
single trigger
Meaning
An acceleration clause in equity agreements allows for the immediate vesting of options or shares upon the occurrence of a single specified corporate event. This provision, known as a single trigger, is most commonly activated by a change of control, such as an acquisition or merger. It removes any future service requirements for the participant, granting them full ownership of their equity allocation at the moment the transaction is completed.
Liquidation Benefit
Immediate access to the financial gains of an acquisition provides a powerful incentive for early employees. A single trigger allows holders to participate fully in the buyout transaction alongside other shareholders. This structure is highly advantageous for founders and early hires who wish to exit the business completely once it is acquired, as they do not have to endure transition periods or work under new corporate leadership to realize their returns.
Acquirer Disadvantage
Purchasing entities often resist these clauses because they risk losing the core talent of the acquired startup. When a single trigger is present, senior staff have no financial incentive to remain with the company after the acquisition, which can reduce the purchase price offered by the buyer.
Equity Management
Negotiations over these clauses must balance the retention needs of the startup with the expectations of talent. Startups often use the single trigger as a recruitment incentive, though they must weigh this against the potential friction it creates during exit negotiations with sophisticated corporate buyers.