What is a Vesting Schedule?
A Vesting Schedule is the full timeline outlining when a recipient of a stock grant (founder, employee, or advisor) officially earns the right to keep their shares. It is the contractual mechanism that turns a promised block of equity into real, owned shares over time.
Equity is a future incentive, and the vesting schedule ensures that the recipient earns it by demonstrating long-term commitment to the company.
The Standard Timeline The vast majority of startups globally adhere to the "4-year vest with a 1-year cliff."
- Year 1 (The Cliff): No shares are earned. If the person leaves, they get 0%. At the 12-month mark, 25% of the total grant is vested immediately.
- Years 2, 3, & 4 (The Schedule): The remaining 75% of the grant is earned incrementally, typically on a monthly basis.
This means that after four years, the recipient has fully vested and owns 100% of their promised equity. If they leave after three years, they walk away with 75% of the shares.
Why it’s a Retention Tool The schedule is designed to incentivize retention. An employee is more likely to stay if they know that leaving means forfeiting the next month's worth of vested shares (the "golden handcuffs"). For founders, a vesting schedule is often imposed by investors to ensure they stay committed through the next funding round.
Key Takeaway: The vesting schedule dictates the rate at which you unlock your wealth. It ties your financial reward directly to your sustained presence and contributions to the company's success.
