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Founder Stock Vesting Schedule
What is a Founder Stock Vesting Schedule in Startups?
A Founder Stock Vesting Schedule is a timeline that determines when startup founders earn full ownership of their shares in the company. Instead of receiving all their shares upfront, founders gain ownership gradually over a set period, usually to ensure they stay committed to the startup.
Synonyms: Founder Stock Vesting Timeline, Founder Equity Vesting Schedule, Founder Share Vesting Plan, Startup Founder Vesting
Why a Founder Stock Vesting Schedule Matters
A vesting schedule protects the startup and its founders by making sure shares are earned over time. If a founder leaves early, they only keep the shares vested up to that point, preventing them from walking away with a large portion of the company without contributing.
How Founder Stock Vesting Schedules Work
Typically, a vesting schedule lasts four years with a one-year "cliff." This means no shares vest in the first year, but after that, a chunk vests all at once. After the cliff, shares vest monthly or quarterly until the founder is fully vested.
Examples of Founder Stock Vesting Schedules
A common example is a 4-year vesting with a 1-year cliff. If a founder leaves after 6 months, they get no shares. If they leave after 18 months, they keep the shares vested for 1 year plus 6 months of monthly vesting.
Frequently Asked Questions
- What happens if a founder leaves before the cliff? They usually forfeit all unvested shares.
- Can vesting schedules be customized? Yes, startups can set different lengths and terms based on their needs.
- Why is the cliff important? It prevents founders from leaving too soon with shares.
- Do investors require vesting schedules? Often, yes, to protect their investment.
