What Is a Vesting Schedule? The 4-Year Vesting and 1-Year Cliff, Explained

What is a vesting schedule?

Hand a co-founder or an early hire their full equity grant on day one, and you've given away ownership you can never claw back — even if they quit in month three. A vesting schedule is the fix: it releases stock or option grants gradually over several years instead of all at once, so equity is earned through continued contribution rather than handed out up front. If someone leaves before their grant is fully vested, the unvested portion returns to the company's option pool instead of walking out the door with them.

Every serious startup — and every institutional investor's term sheet — expects vesting on founder and employee equity. It's not a sign of distrust between co-founders; it's the mechanism that keeps a cap table honest when someone's contribution ends early. Skip it, and a co-founder who leaves after six weeks keeps the same ownership stake as one who stays for the entire journey.

The standard startup vesting schedule: 4 years, 1-year cliff

Almost every US startup uses the same default: a 4-year vesting schedule with a 1-year cliff. Nothing vests during the first 12 months. On the exact one-year anniversary, 25% of the total grant vests all at once — that's the cliff. After that, the remaining 75% vests monthly (1/48th of the original grant each month) over the following 36 months, until the full grant is vested at the 4-year mark.

The cliff exists to protect the company, not to punish the recipient. It filters out the case that actually happens more often than founders expect: a co-founder or early hire who is a bad fit and leaves — or is asked to leave — within the first year. Without a cliff, that person would walk away with a meaningful, permanent stake for a few months of work. With it, they leave with nothing if they don't make it past month 12.

Why co-founders need vesting on their own equity too

The most common vesting mistake isn't skipping it for employees — it's skipping it for co-founders. Founders often assume vesting is something you impose on hires, not on each other. But the exact same risk applies: if one of two 50/50 co-founders leaves after four months, unvested founder stock leaves the company holding a large, permanently dead equity block that the departed co-founder still owns and the remaining founder can't recover.

Investors know this, and it's one of the first things due diligence checks before a priced round. A cap table where the founders never put their own shares on a vesting schedule is a red flag — it signals the team hasn't planned for its own turnover, and it usually forces an awkward, late retroactive vesting negotiation right when the company is trying to close a round.

Accelerated vesting: single trigger vs. double trigger

Acceleration clauses speed up vesting under specific conditions, most commonly an acquisition. A single-trigger clause accelerates vesting immediately when the company is acquired, regardless of what happens to the employee afterward. A double-trigger clause requires two events — an acquisition and the employee being terminated (or their role materially changed) within a defined window afterward, typically 12 months.

Double trigger is now the market standard, and for good reason: it protects the founder or employee from losing unvested equity if they're let go after an acquisition, while still giving the acquirer confidence that the team will stay and keep vesting if they're kept on. Single trigger is rarer today — acquirers dislike it because it lets the whole team cash out and walk immediately, which undermines the retention the acquirer is usually paying for.

How vesting interacts with the option pool

Vesting schedules and the option pool solve related but distinct problems. The option pool is the reserved slice of equity set aside for future hires; vesting is the mechanism that governs how any individual grant — whether it comes from the founders' own shares or the pool — is earned over time. When a hire leaves before they're fully vested, their unvested shares return to the pool, which is one reason a pool that looks fully allocated on paper often has real capacity once departures are accounted for.

This is also where cap table dilution gets confusing for first-time founders: a large unvested grant sitting on the cap table looks like dilution today, but a meaningful share of it may never actually vest. Modeling ownership using only fully vested shares — rather than the full grant size — gives a much more accurate read of who actually controls the company at any given moment.

Testing vesting decisions in a simulation

Founder Runway runs a 20-turn arc from Pre-Seed to Series A, and equity decisions made in the first few turns — including whether and how you vest founder and early-hire shares — keep showing up in your cap table many turns later. Grant equity without a cliff, lose a co-founder early, and watch what a permanently dead equity block does to your ownership by Series A.

Reading about vesting mechanics is one thing; watching a bad grant compound over 20 turns of dilution is a much faster way to internalize why the standard structure exists.

Conclusion

A vesting schedule spreads equity grants over time — typically 4 years with a 1-year cliff — so ownership is earned through continued contribution instead of handed out in full on day one. The cliff protects the company from early departures; monthly vesting after it protects the recipient by making the schedule predictable; and double-trigger acceleration protects both sides around an acquisition. Whatever schedule you set, model it before you sign — the free dilution calculator on this site shows how a grant, vested or not, plays out on your cap table.