Vesting Schedule

The timetable over which employer contributions or equity become fully owned by an employee.

Example

Employer contributions vest 25% a year, becoming fully owned after four years of service.

Important

Leaving before contributions vest can mean forfeiting some or all employer money.

Related terms

  • Employer Match — Money an employer adds to an employee's retirement account in proportion to the employee's own contributions, up to a limit.

Lessons that explain it

  • A cap table is a list of who owns what, and it only ever gets longer — A capitalisation table records every share, option and convertible claim in a company. Ownership percentages depend on whether you count only issued shares or everything that could become shares. (9 min)
  • What the cap table tells you that the founders did not — A cap table reveals founder motivation, past decisions and future obstacles. Low founder ownership, dead equity, unconverted instruments and messy structures are signals worth reading before investing. (10 min)
  • Vesting decides who keeps equity; the pool decides how much is left to give — Founder and employee shares are usually earned over time. Vesting protects the company from dead equity, and pool size determines whether it can hire without another dilutive top-up. (11 min)
  • The co-founder relationship is where many startups actually fail — Diligence on a founding team examines how the founders met, how long they have worked together, how they divide decisions, how they resolve disagreement and how they split equity. (10 min)
  • Check what a founder stands to gain, and what else competes for their time — Founder incentives shape behaviour. Diligence looks at remaining ownership, salary, secondary sales, other roles and personal financial pressure to judge whether founders are motivated for the long journey ahead. (10 min)
  • A founder who leaves without vesting can own a third of the company forever — Founder agreements, vesting and leaver provisions decide what happens when a founder departs. Diligence confirms they exist, are signed and would work as intended. (10 min)

All 578 terms in the Investing glossary