Vesting Schedule
The timeline over which founders or employees earn their full equity allocation.
Definition
A vesting schedule defines when equity actually becomes owned by the recipient. The standard vesting schedule is 4 years with a 1-year cliff: no equity vests for the first year, then 25% vests at the 12-month mark, and the remaining 75% vests monthly over the next 36 months. Vesting protects the company and co-founders from someone leaving early with a large equity stake.
Founders should vest their own shares too. Investors require it, and it protects co-founders if one person leaves. Accelerated vesting clauses can trigger on acquisition (single trigger) or acquisition + termination (double trigger).
Why it matters for founders
Without vesting, a co-founder could leave after 3 months with 50% of the company. Vesting ensures equity is earned through continued contribution. Every investor will require founder vesting, so it's better to set it up proactively.
Example
Two co-founders each receive 40% equity on a 4-year vesting schedule with a 1-year cliff. After 1 year, each has vested 10%. If one co-founder leaves at month 18, they keep 15% (18/48 x 40%) and the remaining 25% returns to the company.
How Foundra helps
Foundra helps founders plan their equity structure and understand vesting implications before bringing on co-founders or early employees.
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Related terms
Cap Table
A spreadsheet showing who owns what percentage of your company.
Cliff Period
The initial period before any equity vests, typically one year.
Equity Dilution
The reduction in a founder's ownership percentage when new shares are issued to investors.
Seed Round
The first significant round of venture funding, typically $500K-$5M.