Common time based vesting with a one year cliff
The most common structure is four year vesting with a one year cliff. Nothing vests during the first twelve months; at the twelve month mark, 25 percent of the total grant vests all at once, and the remaining 75 percent vests in equal monthly or quarterly instalments over the following three years, the same structure covered in general vesting rules. Once a tranche vests, the exercise window sets how long the employee has to act on it.
| Time employed | Options vested (of 48,000 granted) |
|---|---|
| Month 6 | 0 |
| Month 12 (cliff) | 12,000 |
| Month 24 | 24,000 |
| Month 48 | 48,000 (fully vested) |
Acceleration clauses
- Single trigger acceleration: unvested options vest immediately on an acquisition, regardless of what happens to the employee's job.
- Double trigger acceleration: unvested options vest only if there is both an acquisition and the employee is terminated without cause, or their role is materially changed, within a set period afterward. This is more common in Europe as it protects both the acquirer's retention needs and the employee.
- No acceleration: unvested options simply continue vesting under the acquirer, or are cancelled and paid out based on the vested portion only.
Founders and early employees should check whether their grant includes any acceleration provision, since it can materially change the value received on a sale and interacts directly with the terms for leaving the company.
Vesting mechanics people ask about most
- Can vesting be backdated?
- The vesting commencement date can be set to an earlier date, such as an employee's actual start date, even if the formal grant paperwork is signed later, but this must be documented consistently.
- What happens to vested options if the company does a down round?
- Vested options are unaffected by a down round in terms of vesting status, though a lower share price can reduce or eliminate their value if it falls below the strike price.
General information for founders, not legal or tax advice. Thresholds and rates change, so confirm the current position with an adviser in the relevant country before granting.