Equity vesting schedules are an essential part of aligning interests among founders, employees, and investors. A fair vesting schedule can retain talent, prevent issues with ownership, and build a strong foundation of trust. In this post, we’ll dive into what makes a vesting schedule fair, covering common structures, considerations, and pitfalls.

What Is a Vesting Schedule?
A vesting schedule dictates how ownership or stock options are gradually granted over time. For founders, it prevents a situation where one founder leaves early with a large equity stake. For employees, it serves as an incentive to stay and contribute long-term.

Types of Vesting Schedules

1. Time-Based Vesting: Typically, equity is vested over four years with a one-year cliff.
2. Milestone-Based Vesting: Equity vests upon reaching specific company or individual milestones. This is common with senior hires or advisory roles.
3. Hybrid Approach: Some companies combine time-based and milestone-based vesting to offer flexibility in complex roles.

Why Fair Vesting Schedules Matter
Creating a vesting schedule that’s fair for all parties is essential. It prevents disputes, aligns goals, and offers an incentive for employees to remain long-term. When structuring vesting schedules, be sure to consider factors like role, experience, and the company’s growth stage.

Designing a fair vesting schedule benefits both founders and employees by creating an aligned, long-term commitment. Careful planning today can prevent ownership issues down the line.