Whether you’re a high growth tech startup or any other entity, the average vesting period is four years with a one year cliff period. This means that after one year, you can begin accumulating equity ownership, so that you can claim 25% each year until you reach 100% of your ownership interest after four years. The one year cliff means that if you leave before the end of your first full year, you would receive nothing.
With that said, there should be an acceleration clause that allows you to claim 100% of your percentage of equity ownership prior to the end of four years in the event that the company sells or there’s an ownership change, and you’re terminated without cause.
Ensuring that you have an appropriate vesting schedule is prudent if you’re considering any Series A financing. Investors typically are interested not only in the potential of a startup’s product, but also the knowledge, skills and abilities of founders and key team members.
Ensuring continuity of leadership and know-how is vital to the successful launch of an emerging company. Founders who possess too much equity too soon could deter potential investors who know that future success often pivots on the talent, values and expertise of key founders.
In other words, many investors are seeking not just the nascent value of the product, but also the heart of a company. That secret sauce – your brand – is what often distinguishes one company from another, and investors don’t want that to evaporate too quickly, which is a risk if key founders vest too much, too soon.
For more information about vesting schedules or to get one created/reviewed by an experienced startup attorney, check out. Also feel free to message me directly with any questions you have about how vesting works and what is best for your situation.