Shares or options earned over time rather than granted at once, usually with a cliff before any of it is earned. Buyers look at it closely, because it determines who is tied to the company after the deal.
Why it matters
Vesting means shares or options are earned gradually over an agreed period rather than owned
outright the moment they are granted, and it usually includes a cliff — an initial stretch
during which nothing is earned at all, followed by the vesting schedule proper once that period
has passed. It exists to align equity with actual, ongoing contribution: someone who leaves after
a few months should not walk away with the same stake as someone who stayed for years, and vesting
is the mechanism that makes the difference automatic rather than a matter of goodwill after the
fact.
Buyers and investors look at vesting closely for exactly that reason. Founder and key-employee
vesting status is one of the first things due diligence checks, because it answers who is
genuinely tied to the company going forward, and who could leave the day after closing with
nothing lost.
How it works
A typical schedule spreads vesting over several years, with a cliff at the start — commonly
around a year, though the exact length is negotiated rather than fixed — before which leaving
early forfeits the unvested equity entirely. After the cliff, the remainder usually vests in
regular instalments, monthly or quarterly, until the schedule completes.
In an acquisition, unvested founder or employee equity raises its own question: does it continue
vesting under the buyer on the same schedule, does it accelerate and vest in full on closing (a
"single trigger"), or does it accelerate only if the person is also let go afterward (a "double
trigger")? That distinction has real consequences for both sides and is worth settling explicitly
rather than assuming.
Questions people ask
- What does vesting mean for founder or employee equity?
- It means the shares or options are earned gradually over an agreed period rather than owned outright immediately, often with an initial cliff before which leaving forfeits everything unvested. It ties equity to ongoing contribution instead of a one-time grant that survives regardless of how long someone stays.
- What is a vesting cliff?
- A cliff is an initial period, commonly around a year though it varies by agreement, during which none of the equity has vested at all. If the person leaves before the cliff is reached, they forfeit the entire unvested grant; after it passes, the remaining schedule typically vests in regular instalments.
- What happens to unvested equity when a company is acquired?
- It depends on the deal terms. Unvested equity might continue vesting under the buyer on the same schedule, accelerate and vest in full at closing, or accelerate only if the person is also terminated afterward. Which applies is negotiated and should be settled explicitly rather than assumed by either side.
See also
More in Deal structure
- Asset purchase — The buyer acquires chosen assets — code, customers, brand, sometimes staff — rather than the company.
- Cap table — The register of who owns what: shares, options, convertibles and the terms attached to each.
- Earnout — Part of the price paid later, only if the business hits agreed targets.
- Escrow — Part of the price held by a neutral third party for an agreed period, available to the buyer if the seller’s promises turn out to be wrong.
- Liquidation preference — The right of certain investors to be paid before ordinary shareholders when the company is sold.
Keep reading
- AI-powered due diligence for startup investing
- How to value an AI startup
- Frequently asked questions about GetDeal
Updated 2026-09-09