What are some effective equity vesting strategies for startups?

What are some effective equity vesting strategies for startups?

Equity vesting strategies help startups retain talent by gradually granting ownership. Common methods include time-based vesting, milestone-based vesting, and cliff vesting. Would you like to know more about any specific strategy?

Can you explain time-based vesting?

Time-based vesting grants equity over a set period, often four years, with a cliff period where no equity is earned initially. After the cliff, equity vests monthly or quarterly. This encourages employees to stay longer.

What is a cliff period?

A cliff period is the initial time frame during which no equity is vested. For example, a one-year cliff means that employees must work for a year before they receive any equity.

Are there any downsides to equity vesting?

Yes, potential downsides include employee dissatisfaction if they leave before vesting, and complexity in structuring the vesting schedule. It's important to communicate clearly with employees.