Vesting is the process by which founders and employees earn their equity ownership over time. Rather than owning all of your shares outright from day one, vesting creates a schedule under which you earn the right to those shares incrementally — typically tied to continued service to the company.
The most common startup vesting schedule is four-year vesting with a one-year cliff. Here's what that means: for the first 12 months (the "cliff"), you earn no equity. On day 366, you earn 25% of your total grant at once (the cliff vests). After that, the remaining 75% vests monthly or quarterly over the following three years.
Many first-time founders assume vesting is only for employees. In fact, co-founder vesting is one of the most important protective mechanisms a startup can have. If one co-founder leaves six months in — before the cliff — vesting ensures they leave with a proportionally small equity stake, rather than walking away with 30% of the company and no continuing obligation to help build it.
Investors almost universally expect to see founder vesting schedules when reviewing a startup's cap table. If founders own their equity outright with no vesting, sophisticated investors will often require a vesting reset as a condition of investment.
Acceleration provisions determine what happens to unvested equity in an acquisition. There are two types:
When a co-founder departs, the company typically has the right to repurchase unvested shares at cost. Having a clear, legally documented process for this — including buyback rights, notice periods, and dispute resolution — prevents co-founder departures from becoming existential company crises.
Zecca Ross Law builds vesting schedules and co-founder agreement terms that protect all parties — including provisions that prevent a departing co-founder from holding equity hostage or creating governance problems after they leave.
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