What is "vesting"?

Vesting is the process by which a stock grant, or a stock option grant, is allocated to the founder or employee over time.  For example, as a cofounder, after making decisions about the founder equity split, you are going to receive 500,000 founder shares.  These shares should almost never be granted outright, but should be vested over time.  A common vesting schedule looks like this:

  • One year cliff for the first 25%
  • The rest of the stock will vest over the next three years on a monthly basis

This means if you leave the startup before the year is out, you get no stock.  If you leave exactly at the one month mark, you will get 25% of your founder shares.  Thereafter, a proportionate amount of the remainder of your stock every month, until four years are up, by which time you will have received all of your founder shares.

 

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