Founder vesting is the clause that surprises first-time founders the most. You founded the company. You hold the shares. But an investor is now asking you to "re-earn" them over four years.
Founder vesting is a mechanism where equity is earned over a defined period. Shares may be issued upfront but are subject to repurchase if the founder leaves before the schedule completes — this is reverse vesting.
A cliff is an initial period (typically one year) during which no shares vest. If a founder leaves before the cliff, they forfeit all unvested shares. After the cliff, shares vest incrementally — usually monthly — over the remaining period.
Four-year vesting with a one-year cliff is the accepted standard. Be wary of significantly longer periods (5+ years) or longer cliffs — these are less founder-friendly.
Good vs Bad Leaver: If terminated without cause (good leaver) — founders retain vested shares. If dismissed for cause (bad leaver) — vested shares may be repurchased at nominal value. Negotiate for clear, specific definitions.
Double-Trigger Acceleration: Vesting accelerates if two events occur — a change of control AND your termination without cause within a defined period. This protects you from being acquired and immediately let go.
Prior Service Credit: If you've worked on the company significantly before the investment, negotiate to have some shares immediately vested or the vesting start date backdated.
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