What it is
Vesting means equity is earned gradually rather than granted all at once. If someone leaves early, they keep only the vested portion; the rest returns to the company.
Facts
- The standard schedule is 4 years with a 1-year cliff.
- A cliff means nothing vests until the first anniversary; at 12 months, 25% vests at once, then monthly thereafter.
- Founders typically use reverse vesting on their own shares, protecting the company if a co-founder leaves.
- For US stock grants, filing an 83(b) election within 30 days can save significant tax later.
Who it's for
All founders, and any startup granting equity to co-founders, employees, or advisors.
How it helps you
Vesting protects the company and remaining team from a founder or employee who leaves early walking away with a large, unearned equity stake.
Caveats
Missing the 30-day 83(b) filing deadline can create a large tax bill. Founders often forget to put vesting on their own shares until investors demand it.
Conclusion
Vesting keeps equity in the hands of people who stay and build; use the standard 4-year/1-year-cliff schedule and file your 83(b) on time.