Vesting is the process by which someone earns their equity grant gradually, over time or by hitting specific milestones, rather than owning it all immediately. The standard startup schedule is four years with a one-year cliff: no shares vest during the first year, 25% vest all at once at the one-year mark, and the remaining 75% vest monthly or quarterly over the following three years. Vesting protects the company and the other co-founders by making sure equity is earned through continued contribution instead of handed out in full on day one. If your startup lawyer has not reviewed your specific vesting documents, have them do so before you sign anything.
The default startup structure is four years of vesting with a one-year cliff. During year one, nothing vests at all. On the exact one-year anniversary, 25% of the total grant vests in a single lump sum. From that point forward, the remaining 75% vests in equal monthly or quarterly installments over the next three years, until the full grant is vested at the four-year mark.
Vesting aligns everyone's incentives with continued contribution rather than a one-time grant. If a co-founder or early employee leaves after a few months, the cliff means they walk away with nothing, which protects the company from having to carve out permanent equity for someone who barely contributed.
Investors almost always require founder vesting as a condition of investing, because it protects their capital from a scenario where one founder leaves early while still holding a large, fully-owned equity stake.
A co-founder is granted 10,000 shares on a standard four-year vest with a one-year cliff. If they leave after eight months, they have vested nothing and keep zero shares. If they leave exactly at the one-year mark, 2,500 shares (25%) have vested and the remaining 7,500 return to the company. If they stay two full years, 5,000 shares (50%) have vested: the 2,500 from the cliff plus 2,500 more accrued monthly over the second year.
Founders and full-time employees almost universally get the four-year, one-year-cliff structure regardless of stage. Advisors typically vest faster, often over one to two years with no cliff or a much shorter one, since their engagement is smaller and shorter by design.
Founders who have already been working on the company for a year or more before a financing round can sometimes negotiate credit for that time, effectively starting their four-year clock earlier or reducing the remaining unvested amount.
Skipping founder vesting entirely is one of the biggest red flags an investor can see on a cap table, since it signals the founders have not protected the company against an early co-founder departure.
Founders also frequently misunderstand acceleration clauses, which can let unvested shares vest early on an acquisition or termination, and exercise windows, which limit how long a departing employee has to buy their vested options before losing them.
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