Vesting Schedule, Cliff, Acceleration: The Complete Guide to Startup Equity Vesting

Vesting is the mechanism by which equity you’ve been granted becomes yours over time. Without vesting, a co-founder could quit after a month and walk away with half the company.

The standard schedule

• 4 years total vesting.
• 1-year cliff: First 25% vests on the 1-year anniversary.
• Monthly vesting thereafter: 1/48 of total grant per month for months 13–48.

So on a 48,000-option grant:

• Month 1–11: 0 vested.
• Month 12 (cliff): 12,000 vested.
• Each subsequent month: 1,000 additional vested.
• Month 48: Fully vested.

Variations

• 6-year vesting schedules are used at some later-stage companies.
• Back-weighted vesting (e.g., 10/20/30/40) is rare but used when retention is high priority.
• No cliff for founders (if co-founders are long-term trusted partners).

Why the cliff exists

Protects the company from an employee who doesn’t work out but still walks with equity. Prevents “option mining” — joining for a short stint to bank options.

Acceleration on acquisition

Single-trigger acceleration:

• All vesting accelerates upon a change-of-control event.
• Founder-friendly; acquirer-unfriendly.
• Rarely granted by VCs; more common for founders.

Double-trigger acceleration:

• Vesting accelerates only if the employee is terminated (or leaves for “good reason”) within a defined window (commonly 12 months) after the acquisition.
• Market-standard for key employees.
• Protects employees from hostile acquirers while preserving incentives.

Early exercise

Some companies allow early exercise of options — exercising before they vest. Benefits:

• Starts the long-term capital gains clock (U.S.).
• Potentially triggers 83(b) election for minimizing future tax.
• Requires upfront cash.

Risks:

• Forfeit cash if you leave before vesting completes (reverse-vesting mechanic).

Founder vesting

Even founders typically agree to 4-year vesting with 1-year cliff at the priced round. If a founder quits in year 2, unvested shares are clawed back into the pool.

Cooperative founders pre-agree on founder vesting before first outside money to avoid friction later.

Refresh grants

Retention grants given periodically to top performers. Common patterns:

• Year 3 refresh: Extends effective equity horizon.
• Promotion-based refresh: New grant with a new vesting schedule.

Common mistakes

1. Founders skipping vesting — creates massive conflict later.
2. Not documenting acceleration terms in offer letters — relying on plan default.
3. Misunderstanding 83(b) — 30-day filing deadline after exercise.
4. PTEW trap: Vesting continues during employment, but 90-day post-termination exercise window often forces cash exercise quickly after leaving.

Practical takeaway

1. Founders: Negotiate double-trigger acceleration for yourself as part of priced rounds.
2. Employees: Ask about acceleration terms; they matter more than you think at exit.
3. Investors: Enforce clean, consistent vesting terms across the org.

Further reading

• Carta Equity 101: https://carta.com/learn/equity/