[davidu]

Go get any reasonable SV lawyer to have him sign back his stock to the company and then cancel the shares. You can make him an advisor and give him a grant to recognize him for his early efforts.

You will need all the equity you can as you build your company and being nice now giving a big chunk to a non-participating founder will make you bitter later.

If you don't think it will, then let him keep his ~25% vested. He'll be diluted, just like you and everyone else as you raise more.

[mistakes]

This may be a stupid question, but by 'grant', do you mean a stock grant? Why would he agree to a grant of less than X% (which he currently owns)?

The last option is the default, and we are o.k. with it if it comes to that.

[davidu]

Hey may agree to less than what he has today because by giving back a huge chunk of equity to the company it can allocate it to future hires. That way he is hopefully increasing the chances of his somewhat smaller stake being worth more later.

In other words, he'd be better off owning less of something huge than more of something small. :-)

This is not unheard of. It might not be common, but I've only been in silicon valley six years and I've seen it at least a handful of times.

[mistakes]

Thank you for the perspective. It makes sense.