It is my understanding that the standard vesting period for the senior-level people is 4 years. During that 4 year vesting period, is it normal to do a 100% vest after the fourth year or are some investors ok with cliff vesting?
by Naomi Kokubo, Cofounder of Founders Space
Here is a typical four-year stock option vesting schedule for employees:
- In startups, most employees have their shares vest in exactly the same way, whether they are senior executives or entry level employees.
- Employee stock options usually have a one year cliff. This means the employee must work for the company for an entire year before any shares vest. If the employee leaves or is fired before the year is up, his/her shares never vest. If the employee is with the company for the full year, 25% of his/her shares vest.
- After the first year, the shares vest on a monthly or quarterly basis.
- After four years, 100% of the shares are fully vested.
That’s usually how things are structured, although there are always exceptions to the rule. Also, some employees may receive additional stock options that vest over four years as a bonus or reward for good performance. These additional stock options have their own vesting start date.
One more thing, founders usually own founders shares, but the company typically reserves the right to buy them back. This is different from employee stock options described above, but the end results tend to be similar.
I hope this helps!