Founder Vesting: Why You Should Vest Your Own Equity

Founders often assume vesting is something investors impose on them later. In practice, putting your own founder stock on a vesting schedule from day one is one of the more useful things you can do for the company – and for yourself. This is general information, not legal or tax advice; talk to a startup attorney before you finalize any equity documents.

How standard vesting actually works

• Four years total, with a one-year cliff: no shares vest until you have been with the company for a full year, at which point 25% vests all at once.
• After the cliff, the remaining shares vest monthly or quarterly over the next three years.
• Unvested shares return to the company, not to the other founders, if someone leaves before they are fully vested.
• The clock usually starts on a "vesting commencement date" set when the stock is issued – which is not automatically the day the company was formed.

Why you would vest equity you already founded the company with

It feels strange to put a schedule on stock you already own outright. But consider the alternative: without vesting, a co-founder who leaves after two months walks away owning the same percentage as someone who stays for the next decade. Vesting is not a statement of distrust – it is a way of making sure equity tracks the work that actually goes into the company, and of protecting the founders who stay from the ones who do not. It also removes an awkward negotiation later: investors will require founder vesting as a condition of your first priced round anyway, so agreeing to it early means you set the terms yourselves, among co-founders, instead of having a term sheet dictate them.

The 83(b) election: the deadline that does not bend

If your founder stock is subject to vesting, you have the option to file an 83(b) election with the IRS. It lets you pay tax on the value of the stock now – typically close to zero for a brand-new company – instead of paying tax on each tranche as it vests, when the company (and the tax bill) may be worth considerably more. The filing window is 30 calendar days from the date the stock is purchased or granted, with no extensions and no exceptions for weekends, holidays or simply not knowing about it. The IRS now accepts electronic filing through Form 15620 alongside the traditional paper-and-certified-mail route, but the deadline itself has not changed. Missing it does not just cost you a tax benefit – it can mean a real, avoidable tax bill down the road.

Acceleration: what happens to vesting in an acquisition

Vesting schedules also need to say what happens if the company is acquired before you are fully vested. Single-trigger acceleration vests some or all of your remaining shares automatically when the acquisition closes. Double-trigger acceleration requires two events – the acquisition and, typically, your role being terminated or substantially changed within some window afterward – before unvested shares accelerate. Investors and acquirers generally prefer double-trigger, since it keeps founders and key employees incentivized to stay through an integration rather than cashing out and leaving immediately. Whichever version you use, put it in writing as part of your equity documents rather than assuming it will get sorted out at the negotiating table during an actual deal, when you will have far less leverage than you do today.