Vesting Schedules: The Equity Safety Net You Need

You and your cofounder just spent three months building a prototype. The energy is electric. You shake hands on a 50/50 equity split because you're equals, partners, and this thing is going to be huge.

Five months later, your cofounder gets a job offer from Google. They take it. They stop contributing. But they still own half your company.

This isn't a hypothetical. It happens constantly. And it's one of the most devastating, avoidable mistakes cofounders make. A vesting schedule is the single most effective mechanism to protect both of you — not just from bad intentions, but from life's unpredictability. It ensures that equity is earned over time through real contribution, not simply promised on day one and forgotten.

Whether you're in the handshake phase or already building, understanding how a cofounder vesting schedule works isn't optional. It's foundational.

Key Takeaways

• Always implement a vesting schedule from day one — the standard structure is a 4-year vesting period with a 1-year cliff and monthly vesting thereafter, which aligns equity with actual contribution over time.
• Customize your vesting terms to reflect unequal pre-launch contributions by using pre-vesting credit, different start dates, or milestone-based acceleration.
• Use double-trigger acceleration clauses (acquisition plus termination) rather than single-trigger to keep incentives fair and protect cofounders from being forced out after an acquisition.
• In the U.S., file an 83(b) election within 30 days of receiving restricted stock to avoid potentially devastating tax consequences on unvested shares.
• Have a startup attorney draft or review your vesting agreement — the $500–$2,000 cost is negligible compared to the cost of an equity dispute during a fundraise or exit.

What Is a Vesting Schedule, and Why Should Every Cofounder Care?

A vesting schedule is a timeline that determines when founders actually earn their equity. Instead of receiving your full ownership stake the moment you sign an agreement, shares vest — meaning they become truly yours — incrementally over a set period.

Think of it like a loyalty mechanism that works in both directions:

• It protects the company from someone walking away early with a disproportionate share.
• It protects each cofounder by ensuring everyone has skin in the game for the long haul.
• It reassures investors that the founding team is committed.

Without a vesting schedule, you're essentially betting your startup's entire equity structure on the assumption that nothing will change — no life events, no disagreements, no shifts in motivation. That's a bet most startups lose.

The Standard Vesting Structure: Why Four Years With a One-Year Cliff Became the Norm

The most widely adopted vesting schedule in the startup world follows a predictable format:

• Total vesting period: 4 years
• Cliff period: 1 year
• Vesting cadence after the cliff: Monthly or quarterly

Here's how it works in practice:

The Cliff: Your First Checkpoint

During the first year (the cliff period), no equity vests at all. If a cofounder leaves before the one-year mark, they walk away with zero shares. On the day they hit twelve months, 25% of their total allocation vests at once.

The cliff exists for a critical reason: it gives everyone time to evaluate whether the partnership is actually working. Twelve months is long enough to see how someone handles pressure, makes decisions, and follows through. It's a trial period, embedded into your equity structure.

Post-Cliff Vesting: Steady Accumulation

After the cliff, shares typically vest monthly (1/48th of the total each month) or quarterly (1/16th each quarter). This gradual accumulation means that if someone departs in month eighteen, they keep roughly 37.5% of their allocated equity — a proportion that reflects their actual time and contribution.

Why This Structure Works

The four-year schedule aligns with a realistic startup lifecycle. Most companies take three to five years to reach a meaningful milestone — a Series A, profitability, or an acquisition. The vesting period keeps founders aligned with these horizons rather than incentivizing short-term thinking.

Real Scenarios Where Vesting Schedules Save Startups

Let's look at three situations drawn from common cofounder disputes (details changed for privacy).

Scenario 1: The Disappearing Cofounder

Two founders split equity 50/50 with no vesting. Founder B gradually disengaged over six months, eventually stopping all work. Founder A was left doing everything but owned only half the company. When they tried to raise funding, investors passed — no one wanted to back a company where half the cap table belonged to someone uninvolved.

With a vesting schedule: Founder B would have hit the cliff but only earned about 12.5% of their shares (six months post-cliff). The remaining unvested shares would return to the company pool, and Founder A could move forward without a dead-weight cap table.

Scenario 2: The Amicable Life Change

Three cofounders launched a health-tech startup. Fourteen months in, one cofounder's partner received a diagnosis that required them to step away and provide full-time caregiving. No animosity. No drama. Just life.

With a vesting schedule: The departing cofounder kept what they'd earned (roughly 29% of their allocation), and the remaining two founders could reallocate unvested shares to hire a replacement or redistribute amongst themselves. A painful situation handled cleanly.

Scenario 3: The Investor Red Flag

A solo technical founder brought on a business cofounder and gave them 40% equity outright — no vesting. Six months later, during due diligence for a seed round, the lead investor flagged the lack of vesting as a dealbreaker. The founders had to retroactively implement vesting, which created tension around what should count as "time served."

The lesson: Investors almost universally expect cofounder vesting schedules. Having one in place from day one signals maturity and forethought.

Designing a Vesting Schedule That Actually Fits Your Partnership

The standard four-year, one-year-cliff structure is a strong default. But defaults don't fit every situation. Here's how to customize yours thoughtfully.

Consider Unequal Contributions Before Launch

If one cofounder has been working on the idea for a year before the other joined, it doesn't make sense for both to start vesting from zero. Options include:

• Pre-vesting credit: The earlier cofounder starts with a portion of their shares already vested, reflecting prior contribution.
• Different vesting start dates: Document that Founder A's clock started six months before Founder B's.
• Milestone-based acceleration: Tie a portion of vesting to specific deliverables (launching an MVP, closing a funding round) rather than pure time.

Decide What Happens When Someone Leaves

Your vesting agreement needs to address several departure scenarios:

1. Voluntary departure: The cofounder chooses to leave. Unvested shares return to the company pool. Vested shares are typically retained, though some agreements include buyback rights.
2. Termination for cause: If a cofounder is removed due to misconduct or breach of agreement, the company may have the right to repurchase even vested shares, often at the original price.
3. Termination without cause: If a cofounder is pushed out without justification, acceleration clauses may apply (more on this below).
4. Death or disability: Consider whether vesting should accelerate partially or fully.

Acceleration Clauses: The Nuance That Matters

Acceleration means that some or all unvested shares vest immediately upon a triggering event. There are two common types:

• Single-trigger acceleration: Shares accelerate upon one event, such as a company acquisition. This means if the company is bought, all your shares vest instantly regardless of your timeline.
• Double-trigger acceleration: Shares accelerate only when two conditions are met — typically an acquisition plus the cofounder being let go. This is generally considered fairer because it doesn't reward someone for simply being present during an acquisition.

Most experienced startup lawyers recommend double-trigger acceleration for cofounders. It protects you from being forced out after an acquisition while still keeping incentives aligned.

Common Mistakes Cofounders Make With Vesting

Even when founders agree that vesting is important, the execution often goes wrong. Watch for these pitfalls:

• Not including themselves: Some founders implement vesting for employees but exempt themselves. Investors will catch this, and it signals a lack of accountability.
• Setting the cliff too short: A three-month cliff is almost meaningless. It doesn't give enough time to evaluate the partnership. Stick with twelve months unless there's a compelling reason to shorten it.
• Ignoring tax implications: In the U.S., filing an 83(b) election within 30 days of receiving restricted stock can save you significant taxes. Miss this window, and you could owe taxes on stock appreciation before you can even sell. Talk to a tax advisor early.
• Handshake agreements instead of legal documents: A verbal commitment to vesting is worth nothing in a dispute. Get it in writing. Tools like Servanda help cofounders formalize these agreements before they become contentious — which is exactly when you want them locked down.
• Never revisiting the schedule: If roles change dramatically (one cofounder goes part-time, another takes on the CEO role), your vesting terms may need to reflect that. Build in a mechanism for periodic review.

How to Start the Vesting Conversation With Your Cofounder

This is often the hardest part — not the structure itself, but bringing it up. Here's a practical approach:

Frame It as Mutual Protection

Don't say: "I want to make sure you can't screw me over."

Do say: "I want us both to have a safety net. If either of us has to step away for any reason, this makes sure the person staying isn't stuck, and the person leaving gets what they've earned."

Use a Template as a Starting Point

Don't try to draft vesting terms from scratch on a whiteboard. Start with a well-known template (Y Combinator's SAFE documents, Clerky's formation docs, or Stripe Atlas templates all include vesting provisions). Review the template together and negotiate from a shared baseline.

Address These Five Questions Together

1. What is the total vesting period? (Standard: 4 years)
2. How long is the cliff? (Standard: 1 year)
3. What vesting cadence works for us post-cliff? (Monthly is most common)
4. What happens to unvested shares if one of us leaves?
5. Under what circumstances would we consider acceleration?

Get It Reviewed by a Lawyer

A startup attorney can draft or review your vesting agreement for a relatively modest cost — typically $500 to $2,000 depending on complexity. This is not where you cut corners. The cost of not having proper documentation only becomes apparent during a dispute, a fundraise, or an exit — when the stakes are exponentially higher.

Vesting Isn't About Distrust. It's About Durability.

Some cofounders resist vesting because it feels like planning for failure. It's not. Every serious business relationship — employment contracts, partnership agreements, even prenups — includes terms for what happens when circumstances change. Vesting is no different.

The best cofounder relationships aren't the ones where nothing goes wrong. They're the ones where both people have already agreed on what to do when something does.

Conclusion

A cofounder vesting schedule isn't a sign of skepticism about your partnership. It's one of the most constructive things you can do to preserve it. By ensuring that equity reflects ongoing contribution, you remove one of the most common sources of startup conflict before it has a chance to take root.

The right vesting structure protects the cofounder who stays, treats the cofounder who leaves fairly, and gives investors confidence in your team. Whether you adopt the standard four-year cliff model or customize something that fits your unique situation, the only wrong move is to skip it entirely.

Set up your vesting agreement now — while you still agree on everything. That's exactly when it's easiest to get right.

Frequently Asked Questions

What happens to a cofounder's equity if they leave before the cliff?

If a cofounder departs before the one-year cliff period ends, they receive zero vested shares — all of their allocated equity remains with the company. This is by design: the cliff acts as a trial period to ensure the partnership is genuinely working before any equity is earned.

Can you add a vesting schedule after you've already split equity?

Yes, cofounders can retroactively implement a vesting schedule, though it's significantly more complicated and can create tension around what counts as "time served." It's far better to establish vesting terms at the outset, but if you haven't, address it immediately — especially before approaching investors, who almost universally require cofounder vesting.

Do founders need vesting schedules if they trust each other?

Absolutely. Vesting schedules aren't about distrust — they protect both cofounders from life's unpredictability, including health emergencies, family changes, or simply evolving priorities. The strongest partnerships are built on clear agreements made while everyone is still aligned, not on the assumption that nothing will ever change.

What is an 83(b) election and why does it matter for cofounder vesting?

An 83(b) election is a U.S. tax filing that lets you pay taxes on the fair market value of restricted stock at the time of grant rather than as it vests. Filing within the 30-day window can save you significant money because you avoid being taxed on stock appreciation before you can even sell your shares. Missing this deadline is one of the most costly and common mistakes founders make.

How do investors view startups without cofounder vesting schedules?

Most investors consider the absence of a cofounder vesting schedule a serious red flag, and some treat it as an outright dealbreaker during due diligence. Having vesting in place from day one signals maturity, accountability, and alignment — qualities that give investors confidence your founding team is committed for the long term.