What is vesting

What is vesting? As a rule, at the initial stages a startup's founders cannot pay their employees a salary. Instead, they offer shares in the company. It also happens that co-founders divide all the shares among themselves, but there is a risk that one of them will leave in the near future, and it would be wrong and unfair for someone to take a substantial portion of the shares with them and later profit from them without adding value to the company's development. To protect the founder and the company, the concept of vesting was invented. Vesting is a scheme for receiving company shares depending on the time you have worked there; that is, you will not receive the company's shares until you have worked there for a certain period.

The standard vesting period is four years. Each year you receive a quarter of the shares due to you. There is also the concept of a cliff. If you work at the company for less than a year, you will receive nothing. As a rule, unvested shares are distributed among the co-founders or may go into the so-called ESOP, the Employee Stock Ownership Plan. This is employee share ownership.