Fundraising
Vesting
Quick definition
The process by which stock or options become 'earned' over time, typically 4 years with a 1-year cliff.
Standard startup vesting: 4-year schedule with a 1-year cliff. Nothing vests for the first 12 months; on the cliff date, 25% of the grant vests in a lump; the remaining 75% vests monthly over the next 36 months. Vesting applies to both employee equity and founder equity (yes — founders should vest too; investors require it). Unvested shares are forfeited on departure.
Related fundraising terms
SAFE (Simple Agreement for Future Equity)
Convertible instrument commonly used for early-stage rounds.
409A Valuation
Independent valuation of common stock used to set option strike prices.
Cap Table
A record of all ownership interests in your company.
Pro Rata Right
An investor's right to maintain their ownership % in future rounds.
Frequently asked questions
- What is Vesting?
- Standard startup vesting: 4-year schedule with a 1-year cliff. Nothing vests for the first 12 months; on the cliff date, 25% of the grant vests in a lump; the remaining 75% vests monthly over the next 36 months. Vesting applies to both employee equity and founder equity (yes — founders should vest too; investors require it). Unvested shares are forfeited on departure.
- Why is Vesting important for startups?
- Vesting is a fundraising concept that matters for startup founders because it directly affects fundraising readiness, financial decision-making, or operational discipline at the stage where mistakes are expensive to undo. Founders who understand it have a meaningfully easier time in diligence, board meetings, and investor conversations.
- What category does Vesting belong to?
- Vesting is a Fundraising term in the StartupCFO finance glossary — alongside other fundraising concepts that founders, CFOs, and accountants use in daily startup operations and reporting.
- Where can I learn more about Vesting?
- Beyond this definition, see the related fundraising terms below, or explore StartupCFO's insights and tools that put Vesting in context. For specific situations, talk to a fractional CFO who can walk through your numbers.
Got a finance question that needs more than a definition?
Talk to a real CFO. 30 minutes, no contract, free.
