What Am I Missing in My First Executive Offer Letter After Raising a Priced Round?

You just closed your priced round and are finally hiring the CFO or VP you have needed for the past year.

You pull up a generic offer letter template. Salary, title, start date, done.

That approach may work for a standard employee. It is a different story when you are hiring your first senior executive after raising institutional capital.

This person may receive meaningful equity, negotiate severance terms, and have protections that affect the company’s obligations if they leave or the company is sold. Your investors and board may also expect those terms to be properly documented and approved.

A weak offer letter can create cap table problems at exactly the wrong time. Before sending the offer, make sure you understand the terms that matter most.

Vesting and Acceleration on the Executive’s Equity

For a senior hire, a four year vest with a one year cliff is a common starting point, but it should not be treated as the entire conversation.

You also need to decide what happens to the executive’s unvested equity if the company is acquired.

With single trigger acceleration, equity vests automatically when an acquisition occurs.

With double trigger acceleration, the acquisition alone does not cause the acceleration. The executive must also experience a qualifying event, typically the elimination of their role.

The offer letter should also address what happens if you terminate the executive without cause or if the executive resigns for “good reason.”

These details matter because equity that looks straightforward at the time of hiring can become a major issue during a future financing, termination, or sale.

Severance Triggers You Need to Define Now

Severance provisions should not depend on informal conversations or assumptions about what is “fair” later.

The offer letter should clearly define what counts as “cause” and what qualifies as “good reason.” Those definitions can determine whether the executive is entitled to severance or accelerated equity after leaving.

The letter should also state the exact severance period and explain whether benefits continue during that period.

Board approval is another point to address. If the board must approve the executive’s compensation package, make that approval clear rather than relying on an informal conversation or verbal understanding.

Vague language may feel easier during recruitment, but it can create a dispute when the executive leaves or the company is going through a major transaction.

Restrictive Covenants That Actually Hold Up

Your first executive will likely have access to confidential company information and may create intellectual property as part of the job.

Confidentiality and invention assignment provisions should therefore apply from day one. An invention assignment should make clear that intellectual property created as part of the executive’s work belongs to the company.

Non-solicitation provisions may also be useful and are generally more likely to be enforceable than broad noncompete restrictions.

Noncompete rules vary by jurisdiction, and broad restrictions are increasingly difficult to enforce. Founders should therefore avoid assuming that a broad noncompete will protect the company simply because it appears in the offer letter.

The restrictions need to match what is enforceable in the executive’s state.

The 280G Tax Exposure You Cannot Ignore

Once your company has raised a priced round and is hiring senior executives, Section 280G deserves attention.

Section 280G is a federal tax rule dealing with certain “golden parachute” payments made in connection with a change in control. It can affect compensation and equity that accelerates around a future company sale.

This can create a particular problem for startup executives because the calculation compares certain payments against the executive’s compensation rather than simply looking at the value of the company’s equity.

The source of the problem may not become obvious until an acquisition is already underway. By then, there may be little time to address it cleanly.

Planning for 280G exposure in the executive’s compensation arrangements can help protect the executive’s payout and the company’s tax deduction. At exit, a shareholder vote may also be required to address the issue.

Without the required process, the executive can face a 20% excise tax. A 75% shareholder vote can be used to prevent that tax when the applicable requirements are satisfied.

The important lesson for founders is simple: do not wait until the acquisition is signed to think about 280G.

Common Founder Mistakes

• Copying a generic offer letter template. A template designed for an individual contributor may not address executive acceleration, severance, board approval, or other terms that matter for a senior hire. The executive may assume certain terms are standard, while the board discovers the gaps only after something goes wrong.
• Promising verbally what is not in writing. Side conversations about a board seat, faster vesting, bonus targets, or acceleration can become disputes if they never make it into the offer letter. A verbal promise is much harder to resolve than a clearly documented term.
• Ignoring 280G until an acquisition is underway. Founders sometimes wait until a sale is already on the table to consider parachute exposure. At that point, addressing the issue can be difficult because the required shareholder vote must occur before closing. The executive may also face the 20% excise tax when everyone is already focused on completing the transaction.
• Assuming board awareness equals board approval. Telling directors about an executive package informally is not the same as obtaining the approval the company requires. Document the approval process before the offer goes out.

10-Minute Self-Check

• Does the offer letter clearly define “cause” and “good reason”?
• Have I specified single trigger or double trigger acceleration for the executive’s equity?
• Does the severance section state the exact severance period?
• Does it explain whether benefits continue during severance?
• Has the board actually approved the executive’s package?
• Do the restrictive covenants match what is enforceable in the executive’s state?
• Have I checked whether the executive’s equity and compensation could create 280G exposure in a future sale?
• Has an attorney reviewed the offer letter rather than relying only on HR or a template?

If several answers remain unclear, additional review may be worthwhile.

Bottom Line

Your first executive offer letter after a priced round is not just an updated employee template.

The equity terms, acceleration provisions, severance triggers, restrictive covenants, board approval, and 280G considerations can all become important when the executive leaves or the company is acquired.

Getting these terms clear before the executive signs is far easier than trying to resolve missing provisions after a dispute or during an acquisition.

A few hours of careful review at the hiring stage can prevent much more expensive negotiations later.

Am I Missing a Legal Blind Spot Before My Next Executive Hire?

Your first senior executive hire can create legal issues that do not appear in a standard offer letter. Our Product Launch Master Class is designed to help founders identify legal risks early and understand the agreements and policies their business may need.

Join our upcoming session on September 29, 2026, to prepare your company for customers, investors, and future growth.

Register here: https://primumlaw.com/product-launch-master-class/