Standard four year vesting timeline structure
A vesting schedule splits a grant of shares or options into portions that become exercisable or fully owned over a set period. The most common structure in Europe and the US is four years with a one year cliff: nothing vests until the first anniversary, then 25% vests at once, and the rest vests monthly or quarterly over the remaining three years, as set out on the vesting cliff page. Founders' shares work the same way once subject to reverse vesting.
| Time since start | Vested percentage | Vested shares (of 4,000 granted) |
|---|---|---|
| Month 0-11 | 0% | 0 |
| Month 12 (cliff) | 25% | 1,000 |
| Month 24 | 50% | 2,000 |
| Month 36 | 75% | 3,000 |
| Month 48 | 100% | 4,000 |
Alignment and retention through equity schedules
- It aligns reward with time spent contributing to the company.
- It protects the company and co-founders if someone leaves shortly after receiving a grant.
- It gives investors confidence that founders and key employees are committed for the long term.
- It creates a predictable retention tool, since leaving early forfeits future value.
Vesting schedule adjustments for later hires
Some companies use quarterly rather than monthly vesting after the cliff, which is simpler to administer but less granular. Others use three year schedules for later hires, since a four year schedule granted to someone joining a mature company may feel too long. Refresher grants, given to existing employees to keep them incentivised, typically get their own new four year schedule starting from the refresher grant date, following the same 4 year vesting structure used for original grants.
Questions on how vesting schedules play out
- Does vesting apply to founders too?
- Yes. Investors typically require founders to vest their shares, since founders technically already own their shares from incorporation, this is called reverse vesting.
- What happens to unvested shares if someone leaves?
- They are usually forfeited back to the company or bought back at nominal or fair value, depending on the plan rules and leaver classification.
- Can a vesting schedule be changed after grant?
- Only with the agreement of the holder and often the board, since changing vesting terms unilaterally can create legal risk.
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.