Vesting
Also known as Vesting Schedule, Equity Vesting, Stock Vesting
Vesting is the schedule that determines when an employee, founder, or advisor earns ownership of options or restricted stock. The industry standard for venture-backed companies is four years of monthly vesting with a one-year cliff: nothing vests until month 12 (when 25% vests at once), then 1/48th of the original grant vests each month for the next 36 months.
In depth
Vesting is implemented two different ways depending on what is being granted. For stock options (and restricted stock units), the underlying shares are not transferred at grant. The employee earns the right to purchase or receive shares over time, and the vested portion sets how many options can be exercised today. For restricted stock (typical for founders), shares are transferred at grant and subject to a company repurchase right at the original purchase price; the repurchase right lapses on the vesting schedule, so the founder progressively keeps the shares rather than progressively earning them.
The four-year monthly cliff schedule has been the venture norm for over twenty years. Variations exist: some companies use back-weighted schedules (less vests early, more vests late) to extend retention; some use five-year schedules at later stages; some grant performance-based vesting tied to milestones. The cliff specifically addresses early departures, which historically created the worst cap-table problems.
Why it matters
Vesting design is the company's primary retention lever. Unvested equity is the cost of leaving. Acceleration provisions modify that cost in specific scenarios: single-trigger removes it on a sale (employee captures the unvested value at close); double-trigger removes it only if the acquirer terminates the employee. Double-trigger preserves the acquirer's ability to use unvested equity as a retention tool post-acquisition, which is why acquirers strongly prefer it and why Series A investors typically demand it. Cooley's data on Series A terms shows double-trigger acceleration in roughly three-quarters of deals, with acceleration covering 50-100% of unvested shares.
Worked example
A new hire receives 96,000 options on January 1, 2026, at a $0.50 exercise price. Four years monthly, one-year cliff. Vesting trajectory:
| Date | Vested options | Cumulative % |
|---|---|---|
| June 1, 2026 | 0 | 0% |
| Jan 1, 2027 (cliff) | 24,000 | 25% |
| Feb 1, 2027 | 26,000 | 27.1% |
| Jan 1, 2028 | 48,000 | 50% |
| Jan 1, 2030 | 96,000 | 100% |
The employee leaves on July 1, 2028 (30 months in). Vested options at departure: 24,000 (cliff) + 18 × 2,000 (monthly post-cliff) = 60,000. They have 90 days under the plan's standard post-termination exercise window to pay 60,000 × $0.50 = $30,000 to exercise and receive 60,000 shares of common. The remaining 36,000 unvested options return to the option pool. With double-trigger acceleration and a sale of the company on the same date the employee was terminated, all 96,000 would have vested instantly.
Frequently asked
What is the one-year cliff?
The cliff is the minimum service period before any equity vests. On a four-year schedule with a one-year cliff, leaving before month 12 means zero vested equity. Crossing the cliff date vests 25% of the grant in a single event, and from there vesting continues monthly. The cliff exists to protect the company from granting equity to short-tenure hires.
What is the difference between single-trigger and double-trigger acceleration?
Single-trigger accelerates vesting on one event, typically the sale of the company. The employee fully vests at closing regardless of post-closing employment. Double-trigger requires two events: the sale, plus the employee being terminated without cause (or resigning for good reason) within a defined window after closing. Double-trigger is the market standard for employees and founders because acquirers prefer it; single-trigger is rare and reserved for senior executives or specific founder negotiations.
Why do founders vest their own shares?
To protect the company against a cofounder departure. Without vesting, a cofounder who leaves after six months walks away with their full grant, which creates dead equity on the cap table that future investors will not finance around. Investors at the Series A will require vesting on founder shares if it is not already in place. Some founders accept partial pre-vesting credit for time worked before incorporation.
What happens to vested options when an employee leaves?
Vested options remain exercisable for a post-termination window defined in the plan (commonly 90 days). After that, unexercised options expire and return to the option pool. Some companies extend the window to 1-10 years to be more employee-friendly. Unvested options are forfeited immediately on termination. Restricted stock with reverse vesting is repurchased by the company at the original purchase price.