Article · 9 min read

Vesting 101: Structuring Equity for Founders and Employees

Pia Mikhael · Rho Free Beginner

A clean, mechanics-first explainer on why every founder, including you, goes on a 4-year vest with a 1-year cliff. It spells out exactly what the cliff does (leave before month 12, your unvested shares snap back to the company) and why investors will not fund a cap table where founders own their shares outright: unvested founder equity is how they protect the round against one of you walking after the money hits.

  • The standard is 4-year vesting with a 1-year cliff: 25 percent vests at month 12, then the rest monthly or quarterly over three years
  • A cliff means a founder who quits early walks away with nothing, so the equity returns to the company instead of dead-weighting the cap table
  • Investors require founder vesting to keep an investor-ready cap table and lock in long-term commitment, so fully-owned founder shares get flagged in diligence
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The question it answers

  1. How should I split equity with my cofounders before I raise?

Read with it

  1. This is the canonical case for splitting close to equal, written by a YC group partner. It arms you with the exact four reasons... Y Combinator Essay · 5 min read How to Split Equity Among Founders Michael Seibel
  2. The India-specific piece that tells you where the split actually gets signed. It separates the founders' agreement (equity,... Treelife Article · 10 min read Founder Vesting in a Shareholders' Agreement: What Startup Founders Must Know Treelife
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