Vesting schedules explained: a founder's guide

What vesting is

Vesting is how a person earns their equity over time instead of receiving all of it at once. It is the main protection against the co-founder who leaves after three months but keeps half the company.

Think of it as an earn-out: you are promised a number of shares, but they become fully yours only as you meet time or milestone conditions.

Why vesting exists

Without vesting, an equity grant is all or nothing. That creates bad incentives:

• A co-founder can leave right away and keep their full stake.
• An employee can join, receive options and resign the next day.
• Nothing rewards staying and continuing to contribute.

Vesting ties equity to continued participation in the company.

The standard schedule

The most common startup schedule is four years with a one-year cliff:

• Total period: 4 years.
• Cliff: 1 year — nothing vests until the first anniversary.
• After the cliff: the rest vests in equal monthly (sometimes quarterly) installments.
• Fully vested: after 4 years.

Example

A co-founder is granted 100,000 shares on four-year vesting with a one-year cliff:

If the co-founder leaves at month 8, nothing has vested, because the cliff hasn't been reached. If they leave at month 18, they keep 37,500 shares: 25,000 from the cliff plus 12,500 from six months of monthly vesting.

Types of vesting schedules

Cliff vesting

A block of shares vests on one date — nothing before, everything at once. It suits an advisor with a one-year engagement, who receives the full grant after 12 months or nothing if they leave early.

Graded (linear) vesting

Shares vest in equal installments, usually monthly or quarterly — for example, 1/48 each month over four years.

Cliff plus graded

A cliff followed by graded vesting. This is the startup norm for co-founders and early employees: the cliff sets a minimum commitment, and the monthly vesting rewards staying.

Milestone-based vesting

Shares vest when defined business milestones are met rather than on a timetable — for example, when a product ships or the first enterprise contract closes. The milestones have to be precise, or they become arguments.

Performance-based vesting

Like milestone vesting, but tied to individual targets, such as a sales leader's revenue goals.

Acceleration

Acceleration lets unvested shares vest early when certain events happen. The two common forms:

Single-trigger acceleration

Unvested shares accelerate on one event, usually a change of control. For example, 50% of unvested shares vest when the company is acquired. It protects holders in a sale, but acquirers tend to dislike it because key people can leave right after the deal.

Double-trigger acceleration

Unvested shares accelerate only when two things happen: a change of control, and the person is terminated without cause (or resigns for good reason) within a set period. For example, 100% of unvested shares vest if the founder is let go within 12 months of an acquisition. It protects against being pushed out after a sale while keeping people in place through the transition.

What's typical by role

Founders

• Schedule: four years with a one-year cliff.
• Start date: usually the formation date, sometimes earlier to credit prior work.
• Acceleration: double-trigger is common.
• Worth negotiating: a shorter schedule or credit for work already done.

Employees

• Schedule: four years with a one-year cliff.
• Start date: the employment start date.
• Acceleration: often none, sometimes partial single-trigger.
• Worth knowing: options often must be exercised within a set window after leaving, commonly 90 days.

Advisors

• Schedule: one to two years, sometimes with a three- to six-month cliff.
• Start date: the advisory agreement date.
• Acceleration: rarely granted.
• Worth knowing: grants are usually small — often a fraction of a percent — and depend on stage and involvement.

Investors

Investors generally buy fully vested shares.

Common vesting mistakes

1. No vesting at all. One of the most expensive cap table mistakes. Founder and employee grants should vest.
2. One schedule for everyone. Four years makes sense for a founder, not for a six-month engagement.
3. Missing the 83(b) window. If you receive restricted stock that vests, an 83(b) election generally has to reach the IRS within 30 days of the grant. Whether to file depends on your situation — ask a tax advisor.
4. Ignoring acceleration. Without it, founders can lose unvested shares if they are let go after an acquisition.
5. Not tracking vesting events. When nobody can say how many shares have vested for each person, disputes follow.

Tracking vesting in HYVV

Tracking vesting by hand works for two people. It stops working once there are several holders on different schedules. On HYVV's Cap Table:

• Schedules: time-based vesting with a cliff — four years with a one-year cliff by default, or your own cliff (up to 24 months) and total period (12 to 60 months).
• Progress: each holder's vesting progress is shown on the cap table.
• Vesting alerts: holders get an email and a notification at the cliff, each monthly vest and full vesting.
• 83(b): HYVV drafts the 83(b) election from the grant and tracks the 30-day clock. You sign it and mail it to the IRS.
• Departures: unvested shares can be repurchased, or an issuance cancelled or amended.

HYVV tracks time-based schedules. Milestone and performance vesting and acceleration terms belong in your grant documents; HYVV doesn't calculate them. Using the cap table walks through issuing a grant with vesting. For when a revenue share fits better than more equity, see revenue share vs equity.