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Vesting is when the employee earns the right to exercise options. Standard: 4-year vesting with 1-year cliff, nothing for the first year, then 25% vests at the cliff, then monthly/quarterly for 3 more years.
Startup ecosystem · ESOP
Vesting schedules: cliff, graded, and acceleration triggers
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Provisions
SEBI SBEB Regulations | Companies Act 2013 Rule 12
Analysis
Acceleration triggers: "Single trigger", vests on acquisition. "Double trigger", vests on acquisition AND the employee is terminated within X months. Investors prefer double trigger (single trigger makes key employees want the company to sell).
Close
- 4-year vesting / 1-year cliff is global standard, don't deviate
- Monthly vesting after cliff (not annual, reduces employee anxiety)
- Good leaver: continues to vest for notice period, keeps vested options for 90 days to exercise
- Bad leaver (cause-based termination): unvested options lapse, vested options may also lapse
- Double trigger acceleration on acquisition, better for all parties
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