Founder Vesting

TL;DR

A vesting schedule applied to founder equity, typically required by VC investors to align founders with the long-term outcome.

Founder vesting subjects the founders' equity to a vesting schedule (often 4 years with a 1-year cliff, sometimes with credit for time already served). Without founder vesting, a co-founder who leaves after 6 months would walk with their full equity, leaving the remaining team and investors holding the bag.

Founder vesting is standard in VC-backed companies. It's typically renegotiated at each priced round, and credit for time already served is the most negotiated element. Founders should establish vesting before the cap table gets complex.

Worked example

A 2-co-founder team grants themselves 4-year vesting with a 1-year cliff at incorporation, with 12 months of pre-existing tenure credited. If one founder leaves at 18 months, they vest 50% (30 of 48 months credited) — and the remaining 50% returns to the company.

Common pitfalls

• Skipping founder vesting and getting blindsided when a co-founder departs.
• Negotiating credit for time served without modeling the cliff effect.
• Failing to address founder vesting in the term sheet.

When this shows up in a pitch deck

Diligence content; not on the deck.

See Founder Vesting in context

Founder Vesting shows up most often in these scoring rubrics and investor profiles — jump straight to who cares about it and how to pitch them.

In VC frameworks

• First Round Capital — pitch deck framework
• Antler — pitch deck framework

Related terms

• Vesting — The schedule by which equity grants are earned over time, typically 4 years with a 1-year cliff for founders, employees, and advisors.
• Cliff — A vesting feature where no equity vests until a specified milestone (typically 1 year of service), then a chunk vests at once.
• Acceleration (Single Trigger) — A vesting acceleration provision where unvested equity vests automatically on a single triggering event — typically a change of control.
• Acceleration (Double Trigger) — A vesting acceleration provision requiring two events — typically a change of control AND involuntary termination — before unvested equity vests.
• Term Sheet — A non-binding document outlining the principal terms of a proposed financing, used to align investor and founder before legal documents are drafted.

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