Formation and founders
Founder Vesting Explained: 4-Year Schedule, 1-Year Cliff and Acceleration
The short answer
Founder vesting means the company can buy back a departing founder's unvested shares at cost. The market schedule is four years with a one-year cliff: nothing vests for 12 months, then 25% vests at once, and the rest vests monthly over the next 36 months. Acceleration speeds up vesting on a sale; the market form is "double trigger" (a change of control plus termination without cause or resignation for good reason within about 12 months). Set vesting yourself at formation: if you do not, investors will impose it at the first priced round.
Key numbers
| Term | Market position | Source |
|---|---|---|
| Total vesting period | 48 months | Venture Deals; Carta; Series Seed and NVCA practice |
| Cliff | 12 months (25% vests) | Same |
| Vesting after the cliff | Monthly, 1/48 per month | Same |
| Repurchase price for unvested shares | Lower of cost and fair market value | Standard founder stock agreements |
| Acceleration in VC-backed companies | Double trigger, 12 to 13 month window after a change of control | Foundry-style term sheets; Venture Deals |
| Credit for time served | Often 12 months or more if founders worked a year before the round | Venture Deals |
| Median founding team ownership after seed / after Series A | 55.1% / 36.6% | Carta, 2025-2026 |
How "reverse vesting" works for founders
Employees usually receive options that vest. Founders instead buy all their shares on day one at par value and then agree that the company may repurchase the unvested portion if they stop providing services. This structure is called reverse vesting or a repurchase right. It has two advantages: the founder owns and votes all the shares from the start, and with an 83(b) election the founder pays tax only on the tiny purchase price, with all future growth taxed as capital gain.
The repurchase right lapses on a schedule. When it has lapsed for a share, that share is "vested": the founder keeps it even after leaving.
The market schedule, month by month
Founder buys 4,000,000 shares. Vesting commencement date: January 1, 2026. Four years, one-year cliff, monthly thereafter.
| Date | Months of service | Vested shares | Unvested (repurchasable) |
|---|---|---|---|
| June 30, 2026 | 6 | 0 | 4,000,000 |
| January 1, 2027 (cliff) | 12 | 1,000,000 | 3,000,000 |
| July 1, 2027 | 18 | 1,500,000 | 2,500,000 |
| January 1, 2028 | 24 | 2,000,000 | 2,000,000 |
| January 1, 2030 | 48 | 4,000,000 | 0 |
Each month after the cliff, 83,333.33 shares vest (4,000,000 / 48). If the founder leaves at month 18, the company may buy back 2,500,000 shares at the price paid ($0.00001 each, so $25 in total).
Why vesting protects founders, not only investors
Consider two founders splitting a company 50/50 with no vesting. Six months later one leaves. Without vesting, the departed founder keeps half the company and the remaining founder works for the next four years for half the upside. That cap table is often uninvestable. Vesting is insurance between co-founders; investors require it because they are paying for the team's future work.
Credit for time served
If the founders worked on the company before incorporating, or for a year or more before the first round, set the vesting commencement date earlier, or vest a portion immediately. Common structures:
- Backdated commencement date: vesting starts when full-time work started, not when the shares were issued.
- Partial immediate vesting: for example 25% vested at issuance, with the rest over 36 months.
- At the priced round: investors may ask to "re-vest" founders. The founder-friendly answer is to keep the existing schedule or accept a fresh schedule only for part of the shares, with credit for time served (for example 12 or more months vested at closing).
Acceleration: single trigger vs double trigger
Acceleration makes unvested shares vest early.
- Single trigger: vesting accelerates on one event, usually a change of control (sale of the company). Investors and acquirers dislike it, because the founders could walk away the day after closing and the buyer would need new retention equity. It can also increase golden parachute exposure under Section 280G.
- Double trigger: vesting accelerates only if two things happen: a change of control and, within a window (often 12 or 13 months after, sometimes also a few months before), the founder is terminated without "cause" or resigns for "good reason". This is the market position in venture-backed companies.
- Amount: full (100%) acceleration of the unvested shares is common for founders on double trigger; partial acceleration (for example 12 months, or 50%) is the middle ground.
The definitions decide the outcome
"Cause" should be narrow: fraud, a felony, willful misconduct, material breach of the IP agreement after notice and a chance to cure. "Good reason" should include a material reduction in title or duties, a significant base salary cut (for example more than 10% to 25% unless applied to all executives), and relocation of more than about 50 miles. A broad "cause" or a narrow "good reason" can make acceleration illusory.
Three variants
| Term | Founder-friendly | Market | Investor-friendly |
|---|---|---|---|
| Schedule | 4 years, credit for time served, or 3 years | 4 years, 1-year cliff, monthly | 4 years from the round date (full re-vest) |
| Acceleration | Double trigger 100%, plus 6 to 12 months on termination without cause | Double trigger 100% within 12 to 13 months of a sale | None, or board discretion |
| Repurchase price | Lower of cost and fair market value, unvested only | Same | Same, sometimes vested shares at fair market value (resist this) |
Red flags
- Repurchase of vested shares, especially at cost or tied to a broad "cause" definition.
- A full re-vest for founders who have already worked several years.
- Milestone-based vesting (revenue or product targets), which invites disputes about whether a milestone was met.
- A cliff longer than one year or a single four-year cliff.
- Acceleration that does not match between the stock agreement, the offer letter and the equity plan.
Tax notes
Because vesting is a "substantial risk of forfeiture", the founder must file an 83(b) election within 30 days of buying the shares; otherwise each vesting date is a taxable event on the then-current value. If vesting is imposed later on shares that were fully vested, file a protective 83(b) within 30 days of the change. Acceleration on a sale can count toward golden parachute calculations under Section 280G for larger payouts; private companies can usually cleanse this with a stockholder vote of more than 75% of disinterested holders.
Frequently asked questions
Do solo founders need vesting?
There is no co-founder to protect against, but investors still expect vesting at the first priced round. Setting a reasonable schedule yourself, with credit for time served, usually leads to better terms than one imposed later.
What happens to unvested shares if I leave?
The company has the right, usually for 90 days or so after you leave, to buy them back at the lower of what you paid and their current fair market value. Repurchased shares return to the company.
Is a 1-year cliff required for founders?
It is the market default. Some founder schedules use a shorter cliff or no cliff when the founders already worked together before incorporation.
What is double trigger acceleration?
Acceleration of unvested shares that requires both a change of control and a qualifying termination (without cause or for good reason) within a set window. It is the market standard for founders and senior executives.
Can investors change my vesting after I sign?
Only with your agreement, but they can make it a condition of the investment. Expect the question at a priced seed or Series A and negotiate credit for time served.
Does vesting affect voting?
No. Founders hold and vote all their shares, vested and unvested, until any unvested shares are actually repurchased.