Joining a startup often comes with the promise of equity, commonly in the form of stock options. But before you start dreaming about that beachfront property you’ll grab once your company goes public, remember, equity isn’t something you receive all at once. It’s something you earn over time. This process is called “vesting.” Understanding how vesting works helps you see what’s truly yours today, what’s still on the way, and what could slip away, if you leave too soon. 

What Does Vesting Mean?

Think of vesting like earning loyalty status tiers. You join a startup today, but the perks (your equity) don’t show up all at once; you’ve got to earn them. Most startups use a four year schedule with a one-year “cliff.” That means no equity until your first work anniversary—then a big first tier unlocks, or “vests” (typically 25%). After that, you keep climbing: a little more of your equity vests each month or quarter until year four.

Companies use a cliff to reward commitment, ensuring that only employees who stay long enough to make a meaningful contribution receive equity. Having the schedule in place also makes ownership growth predictable so you can plan your moves with confidence.

Crucial detail: when your stock options have vested, it doesn’t mean you own them. Rather, you own the right to buy or “exercise” your stock options at their valuation when they were granted to you. (If your startup is doing well, that’s a good deal!)  

Understanding how the cliff works can help you see what is actually vested (and what you risk losing) at different points in time:

• If you leave before the cliff: You get nothing. (Womp womp)

• If you leave after the cliff: You can exercise whatever has vested so far. (Now we’re talkin’)

How Vesting Works in Real Life

Every equity grant spells out the schedule, cliff, and ground rules that determine how and when your stock options vest (become yours to exercise). This stuff isn’t exactly light reading, so if you have questions, don’t hesitate to ask! 

If you do leave with vested stock options, you usually have 90 days to exercise before they expire. Some companies offer longer windows, so confirm those specific terms. 

Remember, exercising stock options can cost a pretty penny. Think hard before using your hard-earned cash to own illiquid startup shares. See this article for more details.

What to Check Before You Sign or Leave

Whether you’re just about to join a new company, or heading off to something new, planning ahead can help you avoid losing your equity or facing an unexpected tax bill.

1. Confirm your vesting schedule, cliff, and any acceleration rules.

2. Know your post-termination exercise window (usually 90 days, but it varies).

3. Estimate your exercise cost and taxes early. Decide whether to exercise (and if so, whether to seek funding or not), or let the options expire.

Understanding your vesting plan now can help you make smarter financial decisions later. It’s one of the simplest ways to protect the value you’ve already earned. If you want to start keeping track of what your equity is worth, check out the Vestimate, our equity valuation tool at vested.co/start.

This material has been prepared for informational purposes only and is not intended to provide, and should not be relied on for investment, tax, legal, accounting, or other professional advice. Vested does not provide investment, tax, legal, accounting, or other professional advice. You should consult your own investment, tax, legal, accounting, or other professional advisors before engaging in any transaction or equity decision.