Vesting and Cliffs — What Founders Need to Know

Vesting ensures team members earn their equity over time, and cliffs protect startups from over-distributing ownership early. It’s a key tool to safeguard long-term alignment and cap table hygiene.

Why it Matters

Vesting protects your company by making equity earned over time. Without it, someone can leave after 3 months and still own a chunk of your cap table. Cliffs, schedules, and acceleration rules matter — to your team and to your investors.

Founders Checklist

Set standard 4-year vesting with a 1-year cliff for all team members
Customize vesting for advisors (e.g., 1–2 years, no cliff)
Include vesting in stock grants, option agreements, and cap table
Define what happens on termination (voluntary or involuntary)
Decide on single- vs double-trigger acceleration for founders and execs

Founder Fails

No cliff > co-founder left early with 20% equity
Didn’t include vesting in signed docs > investor flagged during diligence
No acceleration clause > got fired post-acquisition, lost unvested shares

When to ask for Help

Before issuing equity to founders, employees, or advisors
To review or update your standard vesting terms
If a team member leaves early and disputes their ownership
When customizing vesting for unique roles or hires
To ensure compliance with IRS rules on early exercise or 83(b) elections

Frequently Asked Questions

Q: What’s a vesting cliff?
A: It’s a trial period. With a 1-year cliff, no equity vests until the 12-month mark. If someone leaves at 11 months, they get nothing.

Q: Should founders have the same vesting as employees?
A: Usually yes — it shows commitment and aligns with investor expectations. Founders should be on 4-year vesting schedules too.

Q: What is acceleration?
A: Acceleration speeds up vesting based on certain events:

Single-trigger: Fully/partially vests on acquisition
Double-trigger: Vests on acquisition and termination without cause