Vesting schedule

What is vesting schedule?

A vesting schedule is the timeline over which someone earns their equity, rather than owning it all at once. The typical startup structure is four years with a one-year cliff: nothing vests until the first anniversary, then shares vest monthly or quarterly. It ties ownership to continued contribution and protects the cap table if someone leaves early.

Worked example

Why it matters for fast-growing companies

Vesting aligns incentives and is your main protection against a co-founder or key hire walking away with a big chunk of equity. Founders should vest too, investors expect it. Get the schedule, cliff, and acceleration terms right up front, because renegotiating equity after someone's already left is painful.

Related terms

• Fundraising & equityCliff (vesting)A cliff is an initial period during which no equity vests at all, then, on the cliff date, a chunk vests at once.
• Fundraising & equityOption poolAn option pool is a block of shares a company reserves to grant as equity to employees, advisors, and future hires.
• Tax & credits83(b) electionAn 83(b) election tells the IRS to tax restricted stock at its (usually tiny) value on the grant date rather than as it vests.
• Fundraising & equityCapitalization table (cap table)A capitalization table (cap table) is a record of who owns what in a company, every share, option, warrant, and convertible security, listed by holder and class.

Frequently asked questions