Silicon Valley Self Regulation
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Vesting

photo by Robert S. Donovan

photo by Robert S. Donovan

VESTING

Description

Vesting is the process by which individuals earn non-forfeitable rights to something, typically stock. This means that once you have worked at a company for a defined period of time, X, you will start to hold the value defined by the company in your offer. For example, imagine a company offered you 100 shares of stock as part of your compensation vesting over four years with a one-year cliff. This means that you will begin to accrue stock options after one year of employment (the vesting cliff), and that you will accrue an equal share of stocks over the remaining time, which is 25 shares for each year after the cliff.

helpful resources

Vesting selection at Investopedia

Rob Fitzpatrick's Equity basics: vesting, cliffs, acceleration, and exits at The Startup Toolkit

Andy Rachleff's What You Need to Know About Vesting Stock at Wealthfront