What is Founder Vesting Schedule?
Nexa Consultancy | Startup & Finance Glossary
A founder vesting schedule is a mechanism where founders earn their equity (shares) over a set period of time. This ensures that a founder must contribute to the company for a certain duration to receive their full ownership stake, protecting the company if a co-founder leaves prematurely.
Base Term for Startups: This is a non-negotiable term for investors and a best practice for all co-founded startups. It prevents "dead equity" on the cap table, where a departed founder retains a large stake without contributing to future growth.
Standard Terms: The most common vesting schedule is a 4-year period with a 1-year "cliff." This means no shares are earned for the first year. At the 1-year anniversary, 25% of their shares vest (the cliff). The remaining 75% then typically vest monthly or quarterly over the next 3 years.
Base Term Example: A founder with 1 million shares on a 4-year vesting schedule with a 1-year cliff leaves after 18 months. They would be vested in 37.5% of their shares (25% at the 1-year cliff + 12.5% for the next 6 months).