Startups & Business › Building the Company

Vesting Schedule

Earning equity over time, usually with a cliff, so departed founders don't keep it all.

Also known as: vesting, vesting schedule, four-year vest, cliff

Vesting means equity is earned over time rather than owned on day one. The standard shape is four years with a one-year cliff: leave before twelve months, keep nothing; after that, ownership accrues monthly. If a co-founder departs in month eight, their unvested shares return to the company instead of dead-weighting the cap table forever.

grant 40% → cliff: 0% until month 12 → then ~0.83%/month → 100% at month 48
leave month 8:   keeps 0%     leave month 30:  keeps ~22.5%

Investors require it, acquirers check it, and teams need it — unvested founder equity sitting with someone who left is the classic deal-killer discovered in due diligence. Founders, employees (stock options) and advisors all vest; only the timelines differ.

The classic mistakes:

• No cliff. Monthly vesting from day one hands a quitter three months of equity for trying. The cliff exists precisely for early departures — keep it.
• Vesting that never started. An oral “we’ll vest” with no documents and no board action is legally nothing. Paper it at formation with a lawyer, not at the first round when it is suddenly urgent.
• Accelerating casually. “Single-trigger” acceleration (everything vests on acquisition) can strip the acquirer’s retention tool and kill deals. Understand double- vs single-trigger before granting either.
• Forgetting tax timing. In some countries, when shares vest (or are granted with an 83(b)-style filing) changes the tax bill enormously. Ask a local tax adviser at grant time — see 83(b) for the US version.

Default: four years, one-year cliff, monthly after, for everyone including you. The discomfort of signing it is the feeling of a future disaster being prevented.