What is share vesting?

B3GIN Team
19/12/22
What is share vesting

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Share vesting in a startup is a method by which employees gain the right to become shareholders in the company gradually over a period of time.

Share vesting in a startup refers to the process by which employees earn the right to ownership in the company over time. This is typically done through a stock option plan, in which the employee is granted a certain number of options to purchase shares of the company’s stock at a set price, known as the strike price.

The options are not immediately exercisable, however. Instead, they vest over a certain period of time, typically four years, with a one-year cliff. This means that the employee must remain with the company for at least one year before any options vest, and then additional options vest on a monthly or quarterly basis thereafter.

The purpose of share vesting is to align the interests of the employee with those of the company and its shareholders. By tying the employee’s ownership in the company to their continued service, share vesting incentivises employees to work hard and stay with the company over the long term. This, in turn, helps the company grow and succeed.

The vesting schedule is usually set by the company and can be different for different employees. Some companies offer immediate vesting, for example, for key hires, or accelerated vesting for those who hit certain performance milestones.

Share vesting is a way for startups to attract and retain talented employees by providing them with an ownership stake in the company. By requiring that employees stay with the company for a certain period of time, share vesting helps ensure that the company’s interests and those of its employees are aligned.

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