Vesting Schedule

A vesting schedule is the timeline over which founders, co-founders, and employees earn their equity. Even though a founder may be "granted" 30% of the company at incorporation, vesting means they actually earn that ownership gradually — typically over 4 years. If they leave before the vesting period ends, they lose the unvested portion.

Vesting protects the company and remaining founders from a co-founder who leaves early but keeps a large stake. It also aligns long-term incentives: founders and employees only get the full value of their equity by staying and building the company.

The standard structure: 4-year vesting with a 1-year cliff, monthly vesting thereafter. The cliff means no equity vests in the first year — if someone leaves in month 11, they get nothing. After the cliff, equity vests monthly (1/48th per month).

Founder vesting in India is less standardised than in the US. Many Indian startups are incorporated without any vesting agreement — which creates serious problems when co-founders part ways. Investors increasingly require founder vesting agreements as part of closing a seed or Series A round, often retroactively from the date of incorporation.

Indian ESOP regulations under the Companies Act 2013 govern employee stock options separately. For employees, vesting must comply with minimum 1-year vesting cliff as per SEBI/Companies Act guidelines for listed companies, though private company rules are more flexible.