Performance based triggers for equity release
Instead of, or alongside, a time based schedule, milestone vesting ties equity release to achieving specific, objectively measurable goals. Examples include hitting a revenue target, closing a specific partnership, launching a product, or completing a funding round. The grant document defines each milestone clearly and specifies what percentage of the grant vests when it is achieved, layered on top of, or instead of, a standard vesting schedule and typically used alongside stock options rather than founder shares.
| Milestone | Example target | Vesting released |
|---|---|---|
| Product launch | Public launch of v1 by an agreed date | 25% |
| Revenue target | Reach 500,000 in annual recurring revenue | 25% |
| Funding milestone | Close a priced Series A round | 25% |
| Time backstop | 24 months of service regardless of milestones | 25% |
Outcome rewards compared to tenure based earning
- Pro: directly rewards outcomes rather than tenure, which can suit advisors or specialist consultants.
- Pro: can motivate focus on specific goals that matter most to the business at that stage.
- Con: milestones can become outdated if the business strategy shifts, leaving the grant stuck.
- Con: disputes can arise over whether a milestone was genuinely met, especially with vague wording.
- Con: harder to value for tax and accounting purposes than a simple time based schedule.
Applicability to advisor and executive role grants
Milestone vesting is most common for advisors and consultants who contribute to specific outcomes rather than day to day work, and for some executive hires where the board wants pay tied closely to results. It is less common for broad based employee grants, where a simple time based schedule is easier to administer fairly across the whole team than layering in accelerated vesting triggers.
Questions on tying equity to milestones
- Can milestone and time based vesting be combined?
- Yes. A common structure ties most of the grant to time and a smaller portion to specific milestones, reducing dispute risk while still rewarding key achievements.
- Who decides if a milestone has been met?
- Usually the board, based on criteria defined in the grant agreement. Vague or subjective milestones increase the risk of disagreement.
- Is milestone vesting common for founders?
- It is less common than time based reverse vesting for founders, though some deals use milestones for specific tranches, such as an earn-out linked grant.
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.