Raising money · A term for founders abroad
What is vesting?
and the cliff. Earning stock over time: unvested shares can be bought back at cost if the holder leaves; four years with a one-year cliff is the norm.
Checked against the IRS's instructions and the states' own rules. Reviewed by Saais Patel, compliance reviewer.
Term 102 of 105 in the glossary, filed under V.Every term, A to Z
Vesting, for a founder abroad.
Founders' stock is usually issued on day one but vests over time, so the company can buy back unvested shares at cost if a founder leaves early. Four years with a one-year cliff is the norm: nothing vests in the first year, then a quarter vests at once, and the rest monthly.
It protects each founder from another walking away with a large stake, and investors expect it. Because the stock is issued now and vests later, each founder files an 83(b) election within 30 days.
Read next · guide · 4 minThe 83(b) election: thirty days, no extension, and filing without an SSNWhat founders ask next.
- Should a solo founder's stock vest?
- Often yes, because investors will ask for it at the first round anyway, and setting it up at the start is simpler.
03 · See also
- Raising money83(b) electionA founder's choice to be taxed on restricted stock when it's granted rather than as it vests, filed with the IRS within 30 days, with no extension.Read the term
- Raising moneyOption poolShares a corporation sets aside, often 10% to 15%, for future employees' and advisers' stock options, granted under a plan the board adopts.Read the term
- Raising moneyCap tableThe record of who owns what share of a company, including options, SAFEs and other convertible instruments; investors read it first.Read the term
- Raising moneySAFEAn investment contract, published by Y Combinator, where an investor pays now for shares issued at a later priced round; used by US corporations.Read the term
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