Founders own their shares from the day they buy them. They vote them, and they appear on the cap table. Vesting for founders works backward from that: the company holds a right to buy back unvested shares at the original price if the founder stops working for the company. As time passes, the repurchase right lapses on more shares. “Vested” means the company can no longer take them back.

That structure is sometimes called reverse vesting. It sits in the restricted stock purchase agreement each founder signs at issuance.

This is general information, not legal or tax advice.

What the clause looks like

The language varies by law firm, but the moving parts are recognizable. An illustrative version, not taken from any specific form:

If the Purchaser’s Service terminates for any reason, the Company may repurchase any Unvested Shares at the lower of (a) the Purchaser’s original price per share and (b) the fair market value per share on the date of termination. The Company must exercise this option within 90 days after termination. Shares vest as set out in the Vesting Schedule, provided the Purchaser remains in continuous Service through each vesting date.

Three details to check in a real agreement: what counts as “Service” (employee only, or also consultant and board member), how long the company has to exercise the repurchase, and whether the repurchase is automatic or requires board action. A founder who moves from full-time employee to part-time advisor may keep vesting if “Service” includes advising.

The four parts of a founder vesting schedule

Every founder schedule answers four questions:

1. Total period. How long until all shares are vested.
2. Cliff. How long before any shares vest.
3. Frequency after the cliff. Monthly, quarterly or otherwise.
4. Acceleration. What events, if any, vest shares early.

Y Combinator’s essay on splitting equity among co-founders describes four years with a one-year cliff as a typical setup in the Valley: nothing vests before the one-year mark, 25% vests at one year, and 1/48 of the total vests each month after. The worked example below uses that schedule.

The schedule month by month

Assumptions
- Founder buys 4,500,000 shares at $0.00001 per share ($45 total)
- Vesting: 48 months, 12-month cliff, monthly thereafter
- Monthly vesting amount: 4,500,000 / 48 = 93,750 shares
- No vesting credit, no acceleration

Month   Vested shares   Unvested (subject to repurchase)
0               0           4,500,000
11              0           4,500,000
12      1,125,000           3,375,000
13      1,218,750           3,281,250
24      2,250,000           2,250,000
36      3,375,000           1,125,000
48      4,500,000                   0

Month 11 to month 12 is the line that matters. A founder who leaves in month 11 keeps nothing. A founder who leaves in month 12 keeps 1,125,000 shares.

If a founder leaves in month eight, the company can repurchase all 4,500,000 unvested shares at the original price: 4,500,000 x $0.00001 = $45. The repurchase price is the reason the 83(b) election matters. The founder paid almost nothing, and gets almost nothing back, but that is the deal both sides signed.

Why the cliff exists

The cliff protects the company from a co-founder who leaves early. Without one, a founder who quits after four months would leave with 4/48 of their shares, about 8%. With a cliff, the company recovers all of them and can use them to recruit a replacement.

Investors look at this because a departed founder holding a large block of stock, with no ongoing contribution, makes the cap table harder to sell to the next investor.

Vesting credit for work already done

Founders who have worked on the company for months before incorporating sometimes get credit for that time. The agreement treats the founder as having started vesting on an earlier date.

Assumptions
- Same 4,500,000 shares and schedule
- 6 months of vesting credit for pre-incorporation work

At issuance (month 0):   6 months credited, still inside the cliff -> 0 vested
Month 6 after issuance:  12 months credited -> 1,125,000 vested
Each month after:        +93,750
Fully vested:            month 42 after issuance

Credit should be a specific number of months tied to real work. Some teams also vest a small portion immediately at issuance instead of granting credit. Either is a negotiated term.

Single-trigger and double-trigger acceleration

Acceleration vests unvested shares early when something happens.

• Single trigger: one event, usually a sale of the company, vests some or all unvested shares.
• Double trigger: two events are required, usually a sale followed by termination without cause (or resignation for good reason) within a set period.

Acquirers pay for a team they expect to keep. If every founder’s shares vest fully on closing, the acquirer has less to hold the team with, and it can respond by lowering the price or requiring new vesting. Double trigger leaves the founder protected if pushed out after a sale while leaving the acquirer something to retain.

A worked double-trigger example:

Assumptions
- Same schedule; company acquired in month 20
- Founder terminated without cause 3 months after closing
- Double-trigger acceleration: 50% of unvested shares on termination
  within 12 months of a sale
- For simplicity, vesting stops counting at closing

Vested at month 20:          20 x 93,750 = 1,875,000
Unvested at month 20:        4,500,000 - 1,875,000 = 2,625,000
Accelerated (50%):           2,625,000 x 0.5 = 1,312,500
Total vested after trigger:  1,875,000 + 1,312,500 = 3,187,500 (70.8%)

How the acquirer treats unvested shares at closing (assumed, converted, or cashed out) depends on the merger agreement, which is a separate negotiation.

The 83(b) election and vesting

Because unvested founder stock is “substantially nonvested” property for tax purposes, each founder needs to decide on an 83(b) election within 30 days of buying the shares. Without it, every vesting date in the table above is a taxable event at the stock’s value on that date. The 83(b) election explained article walks through the tax numbers, and the 83(b) deadline article covers counting the 30 days.

Re-vesting at a priced round

Founders who are already partly vested can be asked by seed or Series A investors to put some vested shares back on a schedule. It is a negotiation. Founders can point to the time already worked, propose a shorter re-vest, or trade re-vesting for acceleration terms. Having vesting in place from day one gives founders a stronger position in that conversation than starting with none.

Choosing the terms

Whatever the founders pick should match the split they agreed on in the co-founder agreement template and the reasoning behind it in how much equity to give a co-founder. Vesting and split are one decision, written into two places.