Double Trigger Acceleration
It is a type of protection that safeguards them from being terminated by an acquirer.
Double trigger is a prevention method that is set to help startup employees. It is a type of protection that safeguards them from being terminated by an acquirer. It does so by integrating an economic decision of unvested equity. If the employee is terminated, they can vest the equity at a greater cost to the acquirer when compared to hiring a new employee. The employee unvested equity is triggered by two events or triggers.
In a double trigger acceleration there are two separate triggers, the change of ownership and certain conditions. For the double trigger acceleration to transpire, both events need to occur. The most common trigger is the involuntary termination of an employee within nine to 28 months of the company’s sale and closing. The condition includes the termination of an employee by the organization without reason. The condition can also include a “good reason” for the resignation of an employee.
In most early-stage companies, the double trigger acceleration has gained popularity compared to the single trigger acceleration. Investors prefer this plan as the employees are protected from being terminated by the acquirer. Without this, it would be a bad place for the employee. Double triggers can even be the distance the founder drives to work, termination without reason, or random things like a change in the team size. It can be defended at any time in the fundraising if it seems unreasonable. The fact that it can be defended is the primary reason it is the most common choice for the employees and the organization.
In terms of the most employee and founder agreements that are signed today, double trigger acceleration replaced single triggers. But for the double trigger acceleration to be relevant, the acquirer must assume and continue the option granter. This will not always be so as acquirers usually have their own plans for the organization and employee incentives.