{
  "id": 7303645,
  "title": "Dead Weight On The Cap Table: The Startup Equity Problem Causing Litigation And How You Can Fix It",
  "url": "https://urgent.news/2026/09/14/dead-weight-on-the-cap-table-the-startup-equity-problem-causing",
  "topic": "finance",
  "section": "Finance & Markets",
  "published": "2026-09-14T11:00:33.000Z",
  "source": {
    "name": "Crunchbase News",
    "slug": "crunchbase-news",
    "url": "https://news.crunchbase.com/startups/cap-table-dead-weight-avoiding-litigation-siegel-grellas/"
  },
  "original_language": "en",
  "account": "David Siegel, a partner at Grellas Shah LLP, warns that most early venture-backed startups use a one-size-fits-all four-year vesting schedule with a one-year cliff. However, this default framework often causes bitter legal battles over founder equity, resulting in costly \"dead weight on the cap table.\" When a co-founder with substantial ownership leaves a startup, they typically retain a significant piece of the company, which becomes a liability. From a venture capitalist's perspective, this situation is detrimental, as the company now has someone holding 15% to 20% of equity who is no longer contributing value. This dead weight can have three major negative effects: it kills motivation, breaks future dilution pools, and creates voting and control issues. The standard one-year cliff and four-year vesting schedule fail to account for the longer life cycle of modern startups. To resolve this problem, startups should consider new approaches to founder equity and vesting. Possible solutions include extending and back-weighting vesting schedules, creating pre-agreed buyouts and forfeiture, and implementing automatic share class conversions that strip voting rights from departing founders.",
  "summary": "The standard four-year founder vesting schedule can leave departed founders with large equity stakes, complicating financing and control, and prompting costly litigation aimed at reclaiming shares. Guest author David Siegel, a partner at Grellas Shah LLP, shares ways startups can reduce these risks.",
  "key_points": [],
  "editors_take": null,
  "illustration": null,
  "coverage": {
    "outlets": 1,
    "also_reported_by": []
  },
  "ai_generated": true,
  "disclaimer": "Summaries, key points and the editor’s take are written by software from other outlets’ reporting and may contain errors — always check the linked original."
}