Full Definition
Vesting is the process by which a person earns the right to their equity (shares or stock options) over time, typically contingent on continued employment or service. Vesting protects companies and co-founders by ensuring that equity is earned through ongoing contribution.
Standard Vesting Schedule
The most common vesting schedule for startups is 4-year vesting with a 1-year cliff:
- Cliff: No shares vest during the first year
- At the cliff: 25% of shares vest all at once after 12 months
- Monthly vesting: Remaining 75% vest monthly over the next 36 months
- Result: 1/48th of total shares vest each month after the cliff
Founder Vesting
Investors typically require founder vesting to ensure founders stay committed. If a founder leaves before fully vesting, the unvested shares return to the company. Some founders negotiate accelerated vesting upon acquisition (single or double trigger acceleration).
4-Year Vesting Schedule (100,000 Shares)
Real-World Example
A CTO with 4-year vesting and 1-year cliff receives 25% of their 100,000 shares after year one, then ~2,083 shares monthly for three more years.
Frequently Asked Questions
What is the most common vesting schedule for startups?
What happens to unvested shares if I leave?
Can founders negotiate their vesting schedule?
Related Terms
A minimum service period before any equity vests, typically one year in startup equity agreements.
Ownership interest in a company, represented by shares of stock.
A reserved percentage of shares set aside for future employee stock options and equity grants.
The right to buy company shares at a predetermined price, commonly used as employee compensation in startups.
A provision that speeds up the vesting of equity, typically triggered by an acquisition or termination.
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