Vesting

Definitions

1. The process by which an employee earns ownership of employer-contributed stock or options over time. Standard startup vesting is a 4-year schedule with a 1-year cliff — meaning you get nothing if you leave before year one, then accrue monthly thereafter.

   In plain English: A schedule that gradually gives you ownership of your stock options over time, so you can't join a startup, get all your shares, and leave the next day.

Etymology

1970s

ERISA (Employee Retirement Income Security Act) establishes vesting schedules for retirement benefits, bringing the term to employment law

1990s

Silicon Valley standardizes the 4-year vesting schedule with 1-year cliff for stock options, aligning employee and company incentives

2010s

The standard vesting schedule barely changes in 30 years, though debates about 1-year cliffs and acceleration clauses continue

Related Terms

• Cap Table
• Dilution
• Cliff
• Cliff
• Moonlighting
• Double Trigger
• Employee Option Pool
• Employee Stock Option
• Equity Vesting
• ESOP
• Advisory Shares
• Anti-Dilution
• Cliff Vesting
• Preferred Stock
• Stock Option
• Stock Vesting
• Vesting Schedule
• W-2