Founder Vesting & Cliffs: Earning What You Already Own

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.

Why It Matters

  • For investors: Ensures founders remain committed. If a founder exits early, unvested shares return to the company — preventing dead equity on the cap table.
  • Between co-founders: A vesting schedule is actually protective. If one co-founder leaves early, they can't retain a disproportionate equity stake without ongoing contribution.

The Market Standard

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.

Key Terms to Negotiate

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.

Evolv's Recommendations

  • Accept 4-year/1-year cliff as standard. Fight on the specifics, not the concept.
  • Insist on double-trigger acceleration if you're building for acquisition.
  • Define good and bad leaver terms precisely. Overly broad "bad leaver" definitions can be weaponised.
  • Get a startup-specialist lawyer to review any vesting clause before signing.

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