Vesting determines when your stock options officially become yours. Startups use vesting to reward long-term contribution and align employee ownership with company growth.
What is a vesting schedule?
A typical startup schedule is four years with a one-year cliff. You may receive your first portion of options after completing one year, then earn the rest monthly or quarterly over the remaining three years.
What is a one-year cliff?
A cliff means no options vest before a certain date. Under a one-year cliff, you generally receive no vested options if you leave before the first anniversary of your start date.
Example
With 1,000 options on a four-year vesting schedule, around 250 may vest after year one. The remaining 750 then vest gradually.