Vesting Schedule Explained: Cliffs, Triggers, Leavers
Vesting schedule explained for founders: the cliff, monthly vesting, acceleration and leavers, with a worked 4-year example so you can talk to investors.
A vesting schedule is the timetable that decides when the shares or options promised to a founder or employee actually become theirs. Until a share vests, the company can take it back if the person leaves. The schedule protects the company, and the people who stay, from handing full ownership to someone who walks away after three months.
Investors expect every founder and early hire to be on a schedule. It also changes what your cap table really means on any given day. This guide covers the basic mechanics, the cliff, monthly vesting, acceleration, the difference between founder shares and employee options, and what happens when someone leaves. It ends with a worked example you can follow with a calculator.
Vesting schedule explained in plain words
To vest means to earn the full right to something over time. If you are granted 48,000 shares on a four-year schedule, you do not own all 48,000 on day one in the sense that matters. You earn them in steps. The part you have earned is vested. The part you have not earned yet is unvested.
A schedule has three settings.
- Vesting period. The total time to earn the grant, for example four years.
- Cliff. A waiting period at the start during which nothing vests. If the person leaves before the cliff ends, they get nothing.
- Frequency. How often shares vest after the cliff, usually every month.
Four years with a one-year cliff and monthly vesting afterwards is a very common structure. It is common practice, not a rule. Nothing in company law says a schedule must look like this. It is a negotiated term, so two years, five years, a six-month cliff or no cliff are all possible. A well-known startup law guide describes it the same way: a common schedule, and a negotiated arrangement rather than a legal requirement.
How the cliff and monthly vesting work
The cliff is the all-or-nothing start. With a one-year cliff, nothing vests for the first 12 months. On the first anniversary, the first 25% vests in one step. This is the cliff date. After that, the rest vests in equal monthly steps until the end.
The reason is simple. A cliff protects the company from someone who leaves very early. Without it, a person who quits in month three would walk away with 6.25% of their grant. With it, they walk away with nothing.
Monthly vesting after the cliff is the usual rhythm because it gives a smooth, fair result. Some schedules vest every quarter or every year instead. The longer the step, the more the person loses by leaving just before a step date.
Worked example of a 4-year schedule with a 1-year cliff
Example: a co-founder receives 48,000 shares. The schedule is four years (48 months), with a one-year cliff and monthly vesting after that.
- At the cliff (month 12), 12 out of 48 months have passed. 12 / 48 = 25%. 25% of 48,000 = 12,000 shares vest at once.
- The remaining 36,000 shares vest over the next 36 months. 36,000 / 36 = 1,000 shares per month.
- At month 48, the last 1,000 vests. Total vested: 12,000 + 36 x 1,000 = 48,000.
| Month the person leaves | Vested shares | Calculation | Unvested shares |
|---|---|---|---|
| Month 11 | 0 | Before the cliff | 48,000 |
| Month 12 | 12,000 | Cliff: 25% of 48,000 | 36,000 |
| Month 20 | 20,000 | 12,000 + 8 x 1,000 | 28,000 |
| Month 30 | 30,000 | 12,000 + 18 x 1,000 | 18,000 |
| Month 48 | 48,000 | 12,000 + 36 x 1,000 | 0 |
The one-month difference between month 11 and month 12 is worth 12,000 shares. That jump is the cliff.
Founder vesting versus employee options
Founders and employees usually receive different instruments, and that changes how vesting works in practice.
| Founder shares | Employee options | |
|---|---|---|
| What the person holds | Real shares, issued on day one | A right to buy shares later at a fixed price |
| What vesting does | Releases a right of the company to buy the shares back | Unlocks the right to exercise the option |
| If the person leaves | Vested shares stay. The company can usually buy back unvested shares | Unvested options usually end. Vested options can be exercised within a window |
| Name for the setup | Reverse vesting | Option vesting |
With founder vesting, the founders often own their shares from the start, and the company holds a repurchase right over the unvested part. This is called reverse vesting. The right shrinks as time passes. Investors ask for it because a company is only worth funding if the founders stay. It also protects co-founders from each other: if one leaves in month six, the others do not carry a ghost shareholder holding half the company.
With employee options, the employee has no shares yet. They hold a right to buy shares at a fixed price, called the strike price. Vesting decides how many of those options they are allowed to exercise. The pool that holds these options is covered in our option pool guide.
Existing founders sometimes ask whether they can be credited for time already worked. Many investors accept that: a founder who started a year ago might get 25% treated as already vested. This is a negotiation, not a standard.
What happens when someone leaves
The rules sit in the grant and in the shareholder agreement, so read yours. The common pattern is as follows.
- Vested shares. A departing founder generally keeps them. The company has no automatic right to buy them back unless the documents say so.
- Unvested founder shares. The company can usually buy them back, often at the price the founder paid, which is frequently very low.
- Unvested options. These normally lapse when employment ends.
- Vested options. The employee can usually exercise them, but only within a set window after leaving. That window is a contract term, and it can be short, so check it.
Example: an employee holds 4,800 options with a strike price of EUR 0.50, on the same schedule as above (four years, one-year cliff, monthly). They leave at month 20. Vested options: 4,800 x 20 / 48 = 2,000. Cost to exercise all vested options: 2,000 x EUR 0.50 = EUR 1,000. The other 2,800 options lapse. If they miss the exercise window, they lose the 2,000 as well.
The percentage a leaver keeps also shrinks over time as new rounds dilute everyone. See equity dilution for how that works.
Acceleration: single trigger and double trigger
Acceleration means some or all of the unvested part vests early when a defined event happens. It matters most when the company is sold, because a buyer may not want to keep the old schedule or may not need the people.
Single-trigger acceleration needs one event. The usual event is a change of control, such as the company being acquired. The shares vest even if the person keeps working for the buyer.
Double-trigger acceleration needs two events. The first is the change of control. The second is that the person is dismissed without cause, or resigns for a good reason defined in the contract, within a set period after the sale. If the person stays and everything is fine, vesting simply continues on the original schedule.
Acceleration exists only if it is written in your documents. Without a clause, an acquisition does not speed anything up.
Example: the co-founder above, with 48,000 shares, sits at month 30 when the company is sold. Vested: 12,000 + 18 x 1,000 = 30,000. Unvested: 18,000.
| Clause | What happens at the sale | Vested after |
|---|---|---|
| None | Vesting continues, or the buyer renegotiates | 30,000 |
| Single trigger, 100% | All 18,000 vest at closing | 48,000 |
| Single trigger, 50% | 9,000 of the 18,000 vest (18,000 x 50%) | 39,000 |
| Double trigger, 100% | Nothing at closing. If dismissed without cause three months later, all remaining vest | 30,000 at closing, 48,000 after dismissal |
Buyers and investors generally prefer double trigger, because single trigger removes the reason for key people to stay after a deal. Founders often ask for at least double trigger. This is a point to negotiate and to agree with your lawyer.
What investors usually look for
An investor reading your cap table will ask three things. Are all founders on a schedule? Is part of the founders’ time already counted as vested, and is that fair? Is there any acceleration that would let founders cash out on a sale and leave? If you have never set a schedule, add one before you raise, ideally with the agreement of every founder. It is easier to agree on it while everyone still gets along.
Vesting also interacts with the other terms in a financing. A SAFE or a convertible note converts into shares later, and those shares do not usually vest. Only founder and employee equity does. For the instruments themselves, see SAFE notes explained and convertible notes explained.
Frequently asked questions
Is four years with a one-year cliff a legal requirement?
No. It is common practice that investors and lawyers tend to start from. The length, the cliff and the frequency are all negotiable between the parties.
Do founders need to vest if they own the company from day one?
Not by law, but most investors require it. Vesting shows that the founders are committed and protects the company if one of them leaves early. Founders usually accept it through reverse vesting on their own shares.
What is the difference between vesting and exercising?
Vesting means you have earned the right. Exercising means you actually use an option to buy the shares at the strike price. You can only exercise what has vested, and usually within a time limit after you leave.
Does vesting stop if I take a leave of absence?
That depends on the grant documents. Some companies pause vesting during long leave and some do not. Ask before you agree to the plan.
What is the difference between a cliff and a vesting period?
The vesting period is the whole time it takes to earn a grant. The cliff is the first part of it, in which nothing vests until the cliff date passes.
This is general education, not legal or tax advice. Instrument names, tax treatment of equity and the formalities of issuing shares differ by country. Check the details with a lawyer where your company is registered.
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