Fair Weather Founders, Dead Equity, and the Cliff that Saves

Written by Phylicia Koh , General Partner at Play Ventures, a leading early-stage gaming VC fund. Phylicia has led investments into Alter (an avatar tech company acquired by Google) and gaming startups at all stages. Prologue written by Mishka Katkoff, who benefited personally from the 2-year cliff.

We had to part ways with two co-founders during the first two years after starting our company. No departure of a founder is easy.   For most startups, losing two co-founders would have been a death blow in the investors' eyes.

But in our case, we avoided the disaster. By disaster, I don’t mean a potential talent gap that a leaver might have left. The real disaster occurs when the exiting co-founder takes their vested shares with them and turns them into dead equity.

In our case, we were protected by our 2-year vesting cliff agreement that our investor, Play Ventures , strongly recommended.   Don't just take my word for it, take Phyllicia’s word. She has the data and founders from Play’s network tell their stories.

*Founder breakups are sensitive. Names have been changed to protect the founders' identities, companies, and to be compliant with non-disclosure agreements. The Hard Truth About Startup Timelines Over 60% of successful startups pivot at least once before finding product-market fit.

Yet we're still clinging to vesting terms created for a world where companies found their stride in months, not years. Let's look at some gaming unicorns we all admire: King (founded 2003) developed roughly 200 browser games before Candy Crush Saga became a phenomenon in 2012—a full 9 years after founding! 9 billion .

Rovio (founded 2003) experimented for years before Angry Birds took flight in 2009—6 years after founding. Went public in 2017 at a $1 billion valuation. Supercell (founded 2010) started with the vision of making cross-platform games.

net (web browser and Facebook MMORPG) , didn’t work out. They later launched Clash of Clans and Hay Day in 2012, nearly 2 years after founding. 6 billion.

Small Giant Games (founded in 2013) didn't see any success until Empires & Puzzles took off in 2017. That’s 4 years after founding. The company was acquired by Zynga in 2018 for $700 million.

Dream Games (founded in 2019) launched Royal Match in March 2021, 2 years after founding, and it took them several years of careful development and testing to create the dynamics that made it a hit. Recently valued at $5 billion in 2025. The 1-year cliff and 4-year vesting schedule became standard during the mid-2000s when money was cheap and acquisitions happened fast.