Vesting Schedule
Definition
A vesting schedule is the timeline over which an individual earns full ownership of granted equity or stock options. The standard startup vesting schedule is four years with a one-year cliff, meaning no equity vests in the first year, followed by monthly or quarterly vesting for the remaining three years.
Overview
A vesting schedule ensures that equity holders earn their ownership over time rather than receiving it all at once. This protects the company and co-founders by preventing someone from leaving early with a large equity stake they have not earned through ongoing contribution.
The industry-standard schedule is 4-year vesting with a 1-year cliff. Under this structure, no shares vest during the first year. On the one-year anniversary, 25 % of the total grant vests at once (the cliff). After that, the remaining 75 % vests monthly (1/48th per month) or quarterly over the next three years.
Vesting applies to both founders (typically imposed by investors) and employees (imposed by the company). Founder vesting is especially important when there are multiple co-founders. Without it, a co-founder who leaves after six months retains their full equity allocation, creating a "dead equity" problem that makes future fundraising difficult and demotivates the remaining team.
Example
An employee receives 10,000 options with 4-year vesting and a 1-year cliff. After year one, 2,500 options vest. Then ~208 options vest each month for the remaining 3 years.
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