The short answer
Vesting is the process of earning equity over time. Unvested founder shares can be bought back by the company if a founder leaves, and unvested employee options expire. Investors expect founders to be on a vesting schedule so the team stays committed.
- Vesting ties equity to time served (or milestones).
- Founder shares often vest monthly after a cliff.
- Unvested founder shares can be repurchased if a founder leaves.
- Acceleration clauses change vesting on an acquisition.
How it works
A vesting schedule sets when equity becomes fully yours. A common structure in US startups is four years of monthly vesting with a one-year cliff, but the terms are negotiable. Founders usually hold restricted stock subject to a company repurchase right on unvested shares; employees usually hold options that vest on the same kind of schedule.
Worked example (hypothetical)
A co-founder holds 3,600,000 shares on a four-year schedule with a one-year cliff. At month 12, 900,000 shares vest at once. After that, 75,000 vest each month. If they leave at month 20, they keep 900,000 + (8 × 75,000) = 1,500,000 shares, and the company can repurchase the other 2,100,000 at the original price.
Acceleration
Single-trigger acceleration vests some or all shares on an acquisition. Double-trigger acceleration requires an acquisition and a termination without cause. Investors generally prefer double-trigger.
Why it matters to a pre-seed or seed founder
If co-founders own shares outright and one walks away in month three, the departing founder keeps a big stake for little work, and new investors see dead equity on the cap table. Put vesting in place early, before your first outside check. Talk to a startup lawyer about the paperwork and tax elections that come with restricted stock.
Frequently asked questions
Do founders really vest their own shares?
Usually, yes. Investors expect it, and it protects co-founders from each other if someone leaves early.
Can vesting credit time already worked?
Yes. Founders often negotiate vesting credit for time spent building before the round.
What happens to unvested options when an employee leaves?
They typically return to the option pool.