Vesting
Definition
The process by which you earn ownership of your equity over time. A vesting schedule determines when your options or shares become fully yours. The most common schedule is 4 years with a 1-year cliff: you earn nothing for the first year, then 25% vests at the 1-year mark, and the remaining 75% vests monthly or quarterly over the next 3 years.
Real-World Example
You are granted 48,000 options with a 4-year monthly vesting schedule and 1-year cliff. After 12 months, 12,000 options vest at once (the cliff). Then 1,000 options vest each month for the remaining 36 months.
Common Mistake
Confusing "granted" with "vested." Being granted 100,000 options means nothing until they vest. If you leave after 6 months with a 1-year cliff, you walk away with zero equity. Always calculate your vested amount, not your granted amount.
Why It Matters
Vesting is the mechanism that aligns your incentives with the company. It is the most important timeline in your equity compensation — it determines when you actually own what you were promised.
Related Terms
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