Vesting Schedule

A vesting schedule defines when your granted equity actually becomes yours over time. A common startup structure is 4 years with a 1-year cliff:

• Months 0–12: Nothing vests. If you leave before 12 months, you get no equity.
• Month 12 (cliff): 25% of your total grant vests at once.
• Months 13–48: The remaining 75% vests in equal installments (usually monthly or quarterly) over the next 36 months.

This protects the company from early departures fragmenting the cap table and makes your equity a long-term incentive. You only realise real value if:

1. You stay long enough for the equity to vest, and
2. There is a liquidity event (e.g. acquisition, IPO, or secondary sale).

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Example: 10,000-Share Grant, 4-Year Vesting, 1-Year Cliff

• Month 6:
  • Vested: 0 shares
  • If you leave: you get nothing.
• Month 12 (cliff):
  • 25% vests: 2,500 shares
  • You now own 2,500 vested shares.
• Month 24:
  • Another 2,500 shares have vested (total 5,000)
  • You are 50% vested.
• Month 36:
  • 7,500 shares vested total (75%).
• Month 48:
  • 10,000 shares vested total (100%).

At a $50M exit (before dilution):

• Month 12: Your 2,500 shares are worth: your ownership % × $50M.
• Month 48: Your 10,000 shares are worth: full ownership % × $50M.
• If you leave at month 30 with 6,250 vested shares: you keep the value of those 6,250 shares; the remaining 3,750 unvested shares are forfeited.

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What to Watch Out For

• Vesting length varies.
  • 4 years is standard, but some companies use 3-year or 5-year schedules (especially for senior roles).
  • Always confirm the exact vesting term.
• Cliff can be negotiable for early hires.
  • If you are employee #1–5, you can often negotiate a 6-month cliff instead of 12 months.
• New grants = new vesting clocks.
  • Promotions or refresh grants usually come with their own 3–4 year vesting.
  • A new 4-year grant in year 3 means you’ll be vesting until year 7 if you stay.
• Vested ≠ liquid.
  • Even 100% vested equity may be worth $0 until there’s an exit or a secondary market.
  • Don’t treat unliquid startup equity as guaranteed savings.

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Related Terms

• Cliff Vesting – The initial period (often 12 months) where no equity vests.
• Equity Cliff – The specific mechanism of that initial no-vest period.
• Founding Equity – The overall equity package, including grant size and vesting schedule.
• Option Pool – The pool of shares reserved for current and future employees; expanding this pool dilutes everyone’s ownership.