The return of unvested stock to a business by departing employees is known as "reverse dilution." Reclaiming stock that has not yet reached its full vesting period is the goal of this process.
Reverse Dilution helps Indian founders by lessening the effect of unvested stock on the ownership structure as a whole. It entails recovering shares from leaving workers, giving equity distribution flexibility.
Quantify the unvested shares that departing employees are returning in order to compute Reverse Dilution. This can be given as a numerical count or as a percentage of all outstanding shares.
Measuring Reverse Dilution is crucial for Indian startups as it helps in maintaining a clear and updated cap table. It guarantees the efficient management of unvested shares and their reallocation to either new or existing staff members.
Think about an Indian tech startup that receives 10,000 unvested shares back from a departing employee. If the total outstanding shares are 1,00,000, the Reverse Dilution would be 10% (10,000 / 1,00,000).
Understanding and strategically implementing Reverse Dilution enables founders to navigate equity distribution in the ever-changing Indian startup landscape, thereby fostering a transparent and healthy ownership structure.