Vesting

Vesting means equity is earned over time rather than granted all at once, protecting the company and co-founders from someone leaving early while still walking away with a full ownership stake. The standard startup schedule is four years, with shares vesting monthly or quarterly after an initial cliff.

Founders typically put their own shares on a vesting schedule too, sometimes with credit for time already worked pre-financing, both to align incentives with investors and to protect remaining co-founders if one leaves early. Vesting also underlies equity compensation for every employee equity grant, whether options or RSUs.

Investors virtually always require founder vesting as a condition of a priced round if it isn't already in place, since an unvested founder base is one of the clearest signals of misaligned long-term commitment.

Vesting is the mechanism that turns equity from a gift into an incentive. Without it, a co-founder who leaves after six months keeps the same stake as the founders who stay for a decade — which poisons the cap table for every future investor and hire. For employees, the cliff-and-vest structure is the retention engine of startup compensation.

Vesting isn't the same as owning shares outright when the equity is options. Vested options still have to be exercised — paid for — to become shares, and they usually expire if not exercised within a set window after someone leaves. Incentive stock options add a tax-code deadline of their own, covered in the ISO vs. NSO entry.

Acceleration terms deserve as much attention as the schedule. Single-trigger acceleration vests unvested equity on an acquisition alone; double-trigger requires both the acquisition and the holder's termination or a material role change. Negotiate these at grant time, not in the middle of a deal.