Deal Terms
Vesting
The schedule by which a founder or employee earns their equity over time. Standard startup vesting is 4 years with a 1-year cliff, ensuring team members are incentivized to stay and contribute over the long term.
Vesting is the mechanism by which equity ownership is earned over time rather than granted all at once. The standard startup vesting schedule is 4 years with a 1-year cliff: no equity vests for the first 12 months (the cliff), then 25% vests at the 12-month mark, and the remaining 75% vests monthly over the following 36 months.
Vesting applies to founders (after raising venture capital, investors require founders to be on a vesting schedule to ensure alignment), employees with stock options, and advisors.
When an employee leaves before fully vested, unvested shares return to the option pool. When a company is acquired, unvested equity typically either accelerates (double trigger: change of control + termination) or continues to vest according to the original schedule.
In Practice
An employee joins a startup and receives 100,000 stock options with a 4-year vest / 1-year cliff. If she leaves after 8 months: 0 options vested (cliff not hit). If she leaves after 14 months: 25% vested at cliff + 2 additional monthly vests = 27,083 options vested. If she leaves after 4 years: all 100,000 options vested. If the company is acquired after 2 years and she has double-trigger acceleration, all unvested options accelerate immediately upon acquisition + termination.
Why It Matters
Vesting aligns team incentives with long-term company success. Founders without vesting schedules have no contractual obligation to stay after raising capital — which is why investors require it. Employees with unvested equity are financially motivated to stay and grow the company. Understanding your vesting schedule is essential for making decisions about when to leave a job or exercise options.
VC Beast Take
Founder vesting is often forgotten until the Series A, when investors require it retroactively. This creates a conversation about how much of the founder's equity they'll 'give back' to vesting — often negotiated as a credit for time already spent. The best practice: put founder vesting in place at incorporation. Four years with a one-year cliff is the market standard. Don't wait for investors to require it.