---
title: "What Is Vesting?"
term: "Vesting"
description: "Vesting is the schedule by which someone earns ownership of stock or options over time — usually with a cliff — so they stay aligned with the company before fully owning their equity."
date: 2026-07-25T00:00:00.000Z
updated: 2026-07-25T00:00:00.000Z
topics: ["equity", "deal-terms"]
source: https://venturecapitaltracker.com/glossary/vesting
---

# What Is Vesting?

> Vesting is the schedule by which someone earns ownership of stock or options over time — usually with a cliff — so they stay aligned with the company before fully owning their equity.

**Vesting** is the process of earning equity over time — the standard mechanism that keeps founders and employees aligned with long-term company outcomes.

### How it works

Typical startup vesting for employees:

- **Four-year schedule** with **one-year cliff**
- Nothing vests until month 12; at the cliff, 25% vests at once
- Monthly or quarterly vesting continues for the remaining three years

Founders often hold shares upfront but agree to **reverse vesting** — the company can repurchase unvested shares if they leave. Investors frequently require founder vesting refresh on major rounds.

Options vest under an [equity incentive plan](/glossary/equity-incentive-plan). Exercising vested options converts them to shares, sometimes triggering tax events. Acceleration clauses — single or double-trigger — can vest unvested equity on acquisition or termination without cause.

Example: 48,000 options, 4-year vest, 1-year cliff. At 18 months, 18,000 options are vested (25% at 12 months + 6 months of the remaining 75%).

### Why it matters

- **Founders:** Understand what you lose if you exit early. Negotiate credit for time served in acqui-hires.
- **Operators:** Total comp includes vesting equity — compare grant size, strike price, and refresh policies across offers.

### Common mistake

Assuming all grants vest the same way. Advisor grants, RSA vs ISO vs NSO, and country-specific tax rules change net outcomes dramatically.

### Related ideas

See also [equity incentive plan](/glossary/equity-incentive-plan), cliff, acceleration, and [leaver provisions](/glossary/leaver-provisions).

## FAQ

### What is vesting in simple terms?

Vesting means you earn your shares or options gradually — commonly over four years with a one-year cliff. Leave before the cliff and you may get nothing; leave after and you keep what has vested.

### Why does vesting matter?

For founders and employees, unvested equity is what you lose on departure. For investors, founder vesting protects against a CEO walking away early with full ownership after a large seed check.


---
Source: https://venturecapitaltracker.com/glossary/vesting