Founder vesting protects the company from a co-founder walking with equity.
Founder vesting is the mechanism that ties equity to time served. Without it, a co-founder can leave after three months and keep 25% of the company forever — a fatal cap-table problem no investor will accept. Standard terms: 4 years, 1-year cliff, monthly vesting after the cliff. Set this at incorporation, not when investors ask.
4 years total with a 1-year cliff: nothing vests for the first 12 months, then 25% vests all at once at month 12, then the remaining 75% vests monthly (1/48 per month) over the next 36 months. A founder who leaves at month 11 gets zero. A founder who leaves at month 13 keeps roughly 27%. This is the terms VCs assume unless you say otherwise.
The cliff is the enforcement mechanism for the first year — the highest-risk period when founders are still figuring out if they can work together. Without a cliff, a co-founder who quits at month 6 keeps 12.5% forever. With a cliff, they get nothing and their shares return to the company's option pool. Every founder should be on a cliff, including the CEO.
When you receive restricted stock subject to vesting, file an 83(b) election with the IRS within 30 days of the grant. This elects to pay tax on the stock's value now (usually near zero at incorporation) rather than as it vests (potentially much higher). Missing the 83(b) window is one of the most expensive tax mistakes a founder can make — potentially six figures at exit.
Single trigger: vesting accelerates on a single event (usually acquisition). Double trigger: vesting accelerates only if two events happen — acquisition AND the founder is terminated without cause within a specified window (typically 12 months). Double trigger is standard for founders; single trigger is rare and usually reserved for exceptional cases. Acquirers strongly prefer double trigger because they want founders to stay post-acquisition.
If you incorporate 18 months after founding (bootstrapping period), founders typically get vesting credit for that time — meaning some portion is already vested at incorporation. Standard: give credit for time actively working on the company, but keep some portion (usually 12-24 months' worth) unvested to preserve retention economics. Document the pre-incorporation work to justify the credit.
No vesting at all: results in dead equity when a co-founder leaves — a poison pill for future rounds. Full acceleration on any termination: gives founders no incentive to stay through acquisition transition. Missing 83(b): triggers massive tax bill as stock appreciates. Handshake vesting without paperwork: legally unenforceable — get it in the stock purchase agreement.
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