A vesting schedule outlines the timeline over which employees or founders gain ownership rights to their shares or stock options. Typically, this schedule spans several years and often includes an initial “cliff” period, during which no shares are vested.
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Why is a vesting schedule important for startups?
A vesting schedule helps retain talent and commitment by gradually rewarding employees and founders with equity over time. This aligns their interests with the long-term success of the company.
What is a “cliff” period?
A cliff is an initial period (usually one year) before any shares vest. If an employee or founder leaves before the cliff ends, they forfeit any equity, helping startups ensure that team members are committed.
How does a vesting schedule impact founders?
For founders, a vesting schedule helps balance equity ownership within the team and signals commitment to future investors, demonstrating stability in the founding team.
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