Fundraising
Vesting
The schedule by which equity (founder shares, employee options, or restricted stock) is earned over time, typically subject to continued service.
In plain English
You're granted equity on day one, but you only OWN it as you stay. Leave early and you walk away with only the portion that's vested.
Example
An engineer gets a 1% option grant on a 4-year vesting schedule with a 1-year cliff. After 12 months they vest 25% (0.25%); after 24 months 50% (0.5%); after 48 months 100% (1%). If they leave at month 9, they vest nothing.
Formula
Standard vesting = 4 years, 1-year cliff, monthly thereafter. At cliff: 25% vests in one chunk. Then 1/48 of the grant vests every month for 36 more months.
Why it matters
Vesting protects the cap table from people who leave early. The single biggest founder mistake is not putting their own shares on a vesting schedule from day one — without it, a co-founder who quits at month 6 walks away owning 30-50% of the company forever.
Common mistakes
- Founders not vesting their own shares — 'we're founders, we'd never leave' is how every founder breakup begins
- Skipping the 1-year cliff to be 'employee-friendly' — creates a paperwork mess if someone leaves at week 3
- Forgetting acceleration clauses (single-trigger / double-trigger) until acquisition negotiations
- Not refreshing top performers at year 2-3 — they hit the cliff and leave