Co-Founder Equity & Vesting
Slide through time to see exactly how equity vests. Understand your cliff, your runway, and what happens if a founder leaves early.
Ownership Timeline
Drag the slider to move forward in time and simulate vesting.
Why Vesting Exists
The "Dead Equity" Problem
Imagine starting a company with a friend, splitting it 50/50 on day one. Six months later, your friend quits to take a high-paying corporate job, while you grind for 4 years to build a multi-million dollar business. Without vesting, your ex-partner still owns 50% of your hard work. Vesting prevents this.
The 1-Year Cliff
The "cliff" is a probation period. If a founder leaves (or is fired) before the cliff (usually 1 year), they walk away with 0% equity. Only after crossing the 12-month mark do they instantly vest 25% (or 1 year's worth), and then continue vesting monthly thereafter. Investors will mandate this to ensure commitment.
Frequently Asked Questions
What is a 1-year cliff in startup equity?
A 1-year cliff is a probation period built into the vesting schedule. It mandates that a founder must remain with the startup for a full 12 months before earning any equity. If they leave on day 364, they exit with 0%. If they stay, on day 365, they immediately vest 25% (representing the first year), and then continue vesting monthly.
Why do Indian investors insist on vesting schedules?
Vesting prevents the fatal "dead equity" scenario. Without vesting, a co-founder could leave the company after a few months but retain their full 50% block of shares indefinitely. This makes the company un-investable for future VC rounds, as the remaining founders and new investors would be overly diluted while rewarding someone no longer contributing to the business.
How is a vesting schedule legally enforced?
A vesting schedule is completely useless if it is just a verbal agreement or a spreadsheet. In India, it must be legally codified via a formal Founders' Agreement or Shareholders' Agreement (SHA), which explicitly outlines the cliff, the monthly vesting logic, and the company's right to repurchase unvested shares if a founder departs.