How do vesting schedules and cliffs work?
How standard vesting schedules and one-year cliffs are structured.
Vesting means you earn your equity over time. The most common startup schedule is four years with a one-year cliff, meaning nothing vests until your first anniversary, when 25% vests at once. The remaining amount vests monthly over the remaining three years.
Why it's used:
It aligns incentives and protects the company if someone leaves early. Founders often vest too, which investors typically expect. Vesting interacts with your 83(b) and acceleration (see related articles).
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