Legal & Equity
Vesting
Vesting is the schedule that turns promised equity into earned equity over time, so a founder or employee actually owns their shares only after staying and contributing for a set period. Until shares vest, the company can take them back if the person leaves.
Also known as: equity vesting, vesting schedule, stock vesting
Why it matters
Vesting is the single best protection against the most common cofounder disaster: someone walks two months in and keeps a third of the company forever. If you are still validating an idea and your cofounder bails after the first pivot, unvested equity means their stake reverts to the company instead of becoming dead weight on the cap table. Investors will not fund a startup where founders hold fully vested shares with no strings, because it signals the team can quit and still get paid. Vesting also forces an honest conversation early, while the idea is unproven and the stakes feel low, about who is really committing. Standard terms (four-year vest, one-year cliff) exist because they survived thousands of breakups, so deviating from them needs a real reason. Setting this up before you incorporate or raise is cheap; fixing it after someone leaves is expensive and ugly. Treat vesting as a build-or-kill stress test for the founding team itself.
Formula
Vested shares = total grant x (months served / total vest months), counted only after the cliff is met
Worked example
Two cofounders split equity 50/50 on a four-year vest with a one-year cliff, 2,000,000 shares each. Cofounder B quits after 8 months, before hitting the cliff, so B vests zero shares and all 2,000,000 revert to the company. Had B stayed 18 months, B would have vested 18/48 of the grant, about 750,000 shares, and kept those while the rest reverted.
Common mistakes
- Skipping vesting between cofounders because it feels like distrust. The opposite is true: the founder who refuses vesting is the one to worry about, and a clean schedule protects everyone equally.
- Forgetting the 83(b) election. If you buy restricted stock subject to vesting and do not file the 83(b) within 30 days, you can owe tax as the shares vest at higher valuations, which can be a brutal surprise.
- Not putting vesting on founder shares at all, then trying to add it during a fundraise. Investors will demand it anyway, often resetting your clock, so set it at incorporation.
Frequently asked questions
What is a standard vesting schedule for startup founders?
Four years with a one-year cliff is the default almost every startup uses. Nothing vests for the first 12 months, then 25 percent vests at the one-year mark, and the rest vests monthly over the remaining three years. This is the schedule investors expect, so picking it avoids a fight later.
What is a vesting cliff?
A cliff is a minimum service period before any equity vests at all, almost always one year. If someone leaves before the cliff, they walk away with zero shares. After the cliff, a chunk vests at once (typically 25 percent on a four-year grant) and the remainder vests gradually. The cliff filters out people who quit early.
Do solo founders need vesting?
If you are truly solo and bootstrapping with no outside money, vesting on your own shares does little, since there is no one to claw them back to. It starts mattering the moment you add a cofounder, an early hire with equity, or take investment. Most solo founders add founder vesting at their first priced round because investors require it anyway.
Vesting vs an option pool: what is the difference?
Vesting is the time-based earning schedule attached to a grant of shares or options. An option pool is the reserved block of equity set aside to grant to future employees. Options from the pool almost always come with their own vesting schedule, so the two work together rather than competing.
What happens to unvested shares when a founder leaves?
Unvested shares are repurchased by the company, usually at the original purchase price (often near zero for founders), or simply forfeited. They return to the company and effectively get redistributed among everyone who stays. Vested shares are kept by the departing founder unless a separate buyback clause says otherwise.
What is acceleration in a vesting agreement?
Acceleration speeds up vesting when a triggering event happens, usually an acquisition. Single-trigger accelerates on the sale alone; double-trigger requires both a sale and the person being terminated afterward. Investors generally prefer double-trigger because single-trigger can make your company harder to acquire.
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Last updated 2026-06-09 · Back to the glossary