Equity Vesting

Vesting is conveying the ownership of equity to the holder.

Vesting schedules show the rate at which equity is vested over time.

It is used to ensure founders and employees stay with the company till the proposed milestones are achieved.

Investors will look for standard vesting schedules on all equity given to founders, co-founders, and employees.  

The standard vesting schedule for early-stage companies is a four-year vesting schedule with a one-year cliff for founders and employees.

The one-year cliff means the vesting starts after one year but conveys equity each month thereafter.

At the end of the first year, the holder receives one-quarter of the equity.

Fully vested means that all ownership has been conveyed to the holder. 

For founders and cofounders, the vesting schedules should be the same even if the equity percentages are different.

The standard vesting for advisors and directors is 2 years with a 3-month cliff.

In some cases, the founders can get double trigger acceleration.

This accelerates the vesting if two events happen at the same time such as the founder leaves and the company undergoes an acquisition.

Vesting is a key concept in equity that founders should understand.

 

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