Founder Perspective
What happens to my equity if I leave my startup?
If you leave before fully vesting, you forfeit unvested shares. Vested shares are typically yours to keep, but you may have a limited window (90 days in most option agreements) to exercise them before they expire.
Equity treatment at departure depends on whether you're a founder or an employee, and whether you have stock or options.
**Founders:** Founder shares are typically subject to a vesting schedule negotiated at the time of institutional investment. Standard is a 4-year vesting schedule with a 1-year cliff. If a founder leaves before the cliff (year 1), they often forfeit all unvested shares. After the cliff, shares vest monthly. Companies (and investors) often have the right to repurchase unvested founder shares at cost when a founder leaves — the mechanics are in the shareholder agreement.
**Employees with options:** Options vest over a schedule (typically 4 years with a 1-year cliff). When you leave, you have a post-termination exercise window — usually 90 days — to exercise your vested options by paying the strike price. If you don't exercise within that window, the options expire worthless.
The 90-day window is a significant pain point. If options have a $10K strike price and exercise requires giving up cash you don't have, many employees let options expire. Some companies have extended exercise windows to 5 or 10 years, but it's not universal.
**Tax implications:** Exercise timing matters enormously for taxes. Exercising ISOs (Incentive Stock Options) within 90 days of leaving can trigger AMT. NSOs (Non-Qualified Stock Options) are taxed as ordinary income at exercise. Both scenarios can result in significant tax liability on equity that isn't yet liquid.
Getting qualified legal and tax advice before leaving a well-funded startup is worth the cost.