Legal & Governance

Vesting

The process by which an employee or founder earns their equity over time based on continued service.

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)

Year 1 (Cliff)25% Vested

Year 250% Vested

Year 375% Vested

Year 4100% Vested

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?

The most common vesting schedule is 4-year vesting with a 1-year cliff. This means no equity vests during the first 12 months, then 25% vests at the 1-year mark, and the remaining 75% vests monthly over the next 36 months.

What happens to unvested shares if I leave?

If you leave before your shares are fully vested, the unvested shares return to the company (or option pool). You only keep the shares that have already vested. If you leave before the cliff, you typically receive zero shares.

Can founders negotiate their vesting schedule?

Yes. Founders often negotiate credit for time already worked (retroactive vesting), accelerated vesting upon acquisition (single or double trigger), or a shorter cliff period. These terms are usually negotiated during fundraising.

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