Why founders should vest too, and why the one-year cliff protects everyone — including the person who leaves.
12 min read · Level 1
Vesting is not a statement of distrust, it is what makes leaving survivable. Without it, a founder who realises in month four that this is not for them faces an ugly choice between staying in something broken and an acrimonious negotiation over shares. The cliff protects the person who goes as much as the company that stays — and it is the single most common thing first-time founders skip and later cannot fix.
Vesting means earning your shares over time rather than owning them all immediately. The standard is four years with a one-year cliff:
Unvested shares return to the company if you leave.
Because the single most damaging thing that can happen to a young company is a founder leaving early and keeping a large permanent stake.
It creates dead equity: a meaningful share held by someone contributing nothing. It demoralises everyone still working, and investors treat it as a serious problem because there is no clean way to fix it.
Vesting is also the thing that makes 'this isn't working' a survivable conversation rather than a catastrophe.
Two founders, 50/50, no vesting. Founder B leaves in month five — it was not working, no bad behaviour.
B keeps 50% for ever. Founder A now does all the work for half the company. Every future round dilutes A while B's absent 50% dilutes equally. Investors see 50% held by someone uninvolved and treat it as close to disqualifying. There is no mechanism to recover it; B has no obligation to give it back and may reasonably decline.
With standard vesting: B leaves in month five, before the cliff, and keeps nothing. A owns the company and can bring in a real partner.
That sounds harsh until you notice B is protected too. Without vesting, B would face enormous pressure to stay in something that was not working, or to hand back shares in an ugly negotiation. The cliff makes leaving clean.
First-time founders often think vesting is something investors impose, so they skip it until a round. By then it is a negotiation with someone who may have already disengaged.
The second mistake: believing 'we trust each other, we don't need it'. Vesting is not about distrust. It is about what happens if life changes — a job offer, an illness, a family move, or simply losing interest. None of those require anyone to behave badly.
The third: no acceleration provision. If the company is acquired, unvested founder shares should usually accelerate. Without it, an acquirer can effectively re-earn your equity.
Including yourself, including the one who had the idea. Especially then.
The standard, and universally understood. Deviating invites questions you do not need.
Unvested shares return to the company. Write it down before anyone has any reason to leave.
Single-trigger (on acquisition) or double-trigger (acquisition plus termination). Double is more common and more acceptable to acquirers.
Signed. A verbal understanding about vesting is worth nothing at exactly the moment it matters.
It protects the person who stays AND the person who leaves. If a co-founder resists it entirely, that is important information.
At incorporation, or immediately if you have already incorporated without it. It is never too late and it only gets harder.
There is no situation where founder equity should be unvested. Sole founders sometimes skip it, and even then investors will usually impose it at the first round.
Investors treat a large stake held by someone no longer involved as close to disqualifying, because there is no clean mechanism to recover it and it demotivates everyone still working. The problem is entirely preventable at incorporation and effectively unfixable afterwards without the departed founder's cooperation.
Apply four-year vesting with a one-year cliff to every founder including yourself, on day one. There is no situation where founder equity should be unvested.
The scenario vesting exists for is mundane, not dramatic: no bad behaviour, no falling out, just someone concluding it is not for them. With a standard cliff they leave with nothing and the company continues. Without one they keep half of it permanently, and every future investor sees that on the cap table.
Assume an amicable early departure will happen to someone. Vesting is the difference between a difficult conversation and a company that cannot raise.
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