Vesting is the process for distributing an asset to someone who is entitled to it.

This could be shares of stock in a company.

Cliff is the initial wait time before the distribution begins.

Startups use vesting to distribute shares to the founders and employees.

A typical startup vesting schedule is a one-year cliff and a four-year vesting period.

This means the first distribution comes one year after the start of the process.

And the shares are distributed each year over four years in equal amounts.

In Web3, tokens can also be distributed using a vesting schedule. 

The typical cliff time is 6 months. 

The token can be vested using a linear model in which case the token is vested in equal amounts over time.

Alternatively, the token can be vested on specific dates at varying amounts.

The linear model provides less price fluctuation and more stability in the community compared to specific date vesting.

Vesting reduces short-term speculation and provides an incentive for token holders to remain with the community longer.

Consider the vesting schedule for your token distribution.  

Thank you for joining us for the Startup Funding Espresso where we help startups and investors connect for funding.

Let’s go startup something today.

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Thank you for joining your host Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing.

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Hall T Martin is the director of Investor Connect, which is a 501(c)(3) nonprofit dedicated to the education of investors for early-stage funding. All opinions expressed by Hall and podcast guests are solely their own opinions and do not reflect the opinion of Investor Connect. This podcast is for informational purposes only and should not be relied upon for the basis of investment decisions.