Vesting is the part of the founder deal that protects the company from its own founders — including you. Almost every venture-backed startup uses it, and most investors will insist on it before they wire money. This guide explains how founder vesting works mechanically, the terms you will see in the documents, the tax election US founders cannot afford to miss, and how to model your own schedule with the calculator below.
If you have not yet decided how much each founder gets, start with how co-founders should split equity. Vesting decides when those shares become permanently yours.
How founder vesting actually works
Founders usually buy their shares outright at the very start, for a tiny price per share, as restricted stock. They own the shares from day one: they can vote them, and the clock for long-term capital gains starts. What vests is not the ownership but the company’s right to take the shares back. The stock purchase agreement gives the company a repurchase option over the unvested portion, usually at the lower of what the founder paid or the current fair market value. Each month that passes, that option shrinks.
This is different from employee stock options, where nothing is owned until the option is exercised. Founders sometimes call their arrangement “reverse vesting” for that reason, a term you will also hear in the UK and Europe, where the same effect is achieved through leaver provisions in the shareholders’ agreement or articles.
The standard schedule: four years, one-year cliff
The market default for both founders and employees is a four-year schedule with a one-year cliff:
- Months 0–11: nothing has vested. If you leave, the company can buy back all of your shares.
- Month 12 (the cliff): 25% vests at once.
- Months 13–48: the remaining 75% vests in equal monthly slices of 1/48 of the total.
Variations are common and all negotiable: quarterly instead of monthly vesting, a shorter or no cliff for founders who have already worked together for a long time, or vesting credit for work done before incorporation (for example, starting the vesting clock six months earlier, so part of the stake is vested on day one). What investors push back on is founders with no vesting at all, or with most of their stock already vested before a first round.
Vesting calculator
Enter your grant and see how much has vested on any date, plus a year-by-year schedule. It runs entirely in your browser; nothing is sent anywhere.
| Date | Months | Vested shares | Vested % |
|---|
Counts whole months completed since the start date and rounds shares down. Real documents may round differently or vest on a specific day of the month — your stock purchase agreement is what counts.
What happens when a founder leaves
When a founder stops providing services, vesting stops. The company then has a window (often 60–90 days) to repurchase the unvested shares at the agreed price. The founder keeps the vested shares. Using the default schedule, a founder with 4,000,000 shares who leaves after 18 months keeps 1,500,000 (12/48 at the cliff plus 6 more monthly slices) and the company can buy back the other 2,500,000.
Two details matter more than founders expect:
- The reason for leaving usually does not matter in US founder documents. Unvested shares can be repurchased whether the founder quits or is removed. Some agreements, more often in the UK and Europe, add “good leaver” and “bad leaver” terms that change the repurchase price or let a bad leaver lose even some vested shares. Read those clauses carefully.
- Who decides a founder has “left”. If a founder goes part-time, the agreement should say whether vesting continues, pauses, or slows down. Silence here is the source of many disputes. See part-time and late co-founders.
Acceleration: single and double trigger
Acceleration clauses make unvested shares vest early when certain events happen.
- Single-trigger: some or all unvested shares vest when the company is acquired. Founders like it; acquirers do not, because it removes the incentive for the team to stay after the deal.
- Double-trigger: vesting accelerates only if the company is acquired and the founder is terminated without cause (or resigns for “good reason”) within a set window, often 12 months, after the deal. This is the more common founder term because it protects the founder without spooking buyers.
Acceleration is often partial (for example, 50% or 12 months of unvested shares) rather than full. If you are three equal founders asking whether there is a middle ground between single and double trigger, partial single-trigger acceleration combined with full double-trigger acceleration is one such compromise; your lawyer can tell you how acquirers in your sector tend to treat it.
The 83(b) election (US founders)
Under US tax law, restricted stock that is subject to vesting is normally taxed as it vests, on the difference between its value at that time and what you paid. If the company has grown, that can mean ordinary income tax on shares you cannot sell. A Section 83(b) election tells the IRS you want to be taxed on the value at purchase instead — which for founders buying at a fraction of a cent per share is usually close to zero.
- Deadline: 30 days from the date the stock is issued. There are no extensions and late elections are not accepted.
- How to file: since mid-2025 the IRS accepts the election online through Form 15620 (you sign in with an ID.me account), or you can still mail it, ideally by certified mail with return receipt. File one way only.
- Keep proof and give a copy to the company. Investors and acquirers will ask for it in diligence.
83(b) is US-specific. Founders in other countries face different rules (for example, UK founders often look at how restricted securities are treated under the employment-related securities rules), so ask a local accountant before shares are issued.
Why investors care
A seed or Series A investor is buying into a team. If a co-founder with 40% of the company could walk away next month with all of it, the investment is at risk, and the remaining founders would be working for an absentee owner. That is why term sheets frequently ask founders to put their stock on a vesting schedule (or re-vest part of it) as a condition of the round. Founders who already have sensible vesting in place have one less thing to negotiate.
Checklist before you sign
- Vesting start date, total length, cliff, and frequency are written in the stock purchase agreement.
- Vesting credit for pre-incorporation work, if any, is explicit.
- Repurchase price and window for unvested shares are stated.
- Acceleration terms (single, double, partial) are clear, and every founder understands them.
- What happens to vesting if a founder goes part-time is defined.
- 83(b) elections are filed within 30 days and copies are stored with company records.
- The equity split itself and the decision-making rules are documented in the co-founder agreement.
Frequently asked questions
What does a 4-year vesting schedule with a 1-year cliff mean?
Nothing vests during the first 12 months. On the one-year anniversary 25% of the shares vest at once, and the remaining 75% vest in equal monthly amounts over the following 36 months, so everything has vested after four years.
Do founders need vesting if they trust each other?
Yes. Vesting protects the company if anyone leaves for any reason, including illness or a change in personal circumstances, and most venture investors require it before investing. It is far easier to set up at incorporation than to negotiate later.
Can founders get credit for time worked before incorporation?
Yes. A common approach is to start the vesting clock at an earlier date, such as when the founders began working full-time, so that part of the stock is already vested when it is issued.
What is the deadline for an 83(b) election?
30 days from the date the restricted stock is issued. The IRS does not grant extensions. Since 2025 it can be filed online using Form 15620, or by mail.
What happens to unvested shares if a co-founder leaves?
Vesting stops on the departure date and the company can repurchase the unvested shares, usually at the original purchase price, within the window set in the stock purchase agreement. Vested shares stay with the departing founder unless the agreement says otherwise.