Skip to main content
Mobius
Intermediate

What is vesting

Also known as: vesting schedule

Definition

Vesting is a schedule under which shares or options granted to you become yours to keep or exercise step by step, as long as you keep working for the company.

Why it matters

Vesting makes a stake follow the work.

Common mistakes

Saying vesting makes an employee an owner. Vesting makes options exercisable, and ownership comes only when they are exercised.

Related terms

Worked exampleIllustration

An employee leaves after 18 months

Illustrative numbers: an early employee of a fictional clinic booking app receives options over 240 shares, four years with a one year cliff, monthly after it.

  1. Months 1 to 11

    Nothing vests. Leaving now would mean leaving with no options.

    0

  2. Month 12

    At the cliff, a quarter of the grant vests at once.

    240 ÷ 4 = 60

  3. After the cliff

    The remaining 180 options vest over the next 36 months.

    180 ÷ 36 = 5 a month

  4. Months 13 to 18

    Six monthly portions are added.

    6 × 5 = 30

  5. Leaving

    The employee leaves after month 18 with the vested options, and the rest return to the pool.

    90 kept, 150 returned

Options are earned by staying, one month at a time after the first year.

Illustration

What an employee keeps on leaving

Leaving after month 18, the employee keeps 90 of the 240 options, and 150 return to the pool.060120180240⁨Month 18: 90⁩012243648⁨Months since the grant⁩

Kept (vested)90

Back to the pool150

Leaving after month 18, the employee keeps 90 of the 240 options, and 150 return to the pool.

240 options over four years: nothing before the one year cliff, 60 at month 12, then 5 a month. Move the month the employee leaves.

Definition

Vesting ties a grant of shares or options to time or to milestones. For an employee, vested options can be exercised, and options that have not vested are lost on leaving and usually return to the pool. For a founder the mechanism is usually reverse vesting: the founder owns the shares from day one, and the company's right to buy back the unvested ones lapses month by month. A common structure is four years with a one year cliff: nothing vests in the first year, a quarter vests at the first anniversary, and the rest vests monthly after it.

Why it matters

Without it, a cofounder who leaves after a few months keeps a full share while the others carry the company. With a one year cliff, someone who leaves in month 11 leaves with nothing and someone who leaves in month 12 leaves with a quarter. In Israel vesting also meets tax: employee options are commonly granted under section 102 of the Income Tax Ordinance through a trustee, and that track has a holding period of its own, separate from the vesting schedule.

Directly related: Equity, Option pool, Dilution.

Improvement tips

  • Start from the common structure, four years with a one year cliff, and change it only for a reason you can explain.
  • Put founders on vesting too, usually as reverse vesting, so a founder who leaves early does not keep a full stake.
  • Consider double trigger acceleration: unvested options vest early only if the company is sold and the person is then let go without cause.
  • Show the plan to your accountant before any grant is made, because the tax track matters as much as the schedule.

Common mistakes

  • Issuing founder shares with no vesting and no buyback right, so a founder who leaves early keeps everything.
  • Confusing the vesting schedule with a tax holding period. They are two separate clocks.
  • Leaving the vesting terms out of the signed agreement and relying on an oral understanding.

Related terms

StartupsBeginner

Equity

Equity is ownership of a company, measured in shares and percent. On a balance sheet the same word means book equity: what the business owns minus what it owes.

StartupsIntermediate

Option pool

An option pool is a block of shares reserved for future employees' options. If it is created before the investor's money, existing shareholders pay for it.

StartupsIntermediate

Dilution

Dilution is the fall in existing shareholders' percentage of a company when it issues new shares. The percentage drops, while the stake's value can rise.

From the blog

Do You Actually Need a Co-Founder?

How to decide whether a co-founder adds real strategic value or creates ownership, decision, and execution risk.

Early-Stage Fundraising: What Investors Need to See

How founders can prepare for early fundraising with clearer milestones, traction evidence, dilution thinking, and investor-ready answers.

Quick check

An employee holds options over 240 shares, four years with a one year cliff and monthly vesting after it. How many have vested when they leave after 18 months?

Choose an answer

Frequently asked questions

Should founders put their own shares on vesting?
Yes, it is common and it protects the founders from each other. For founders it is usually reverse vesting: you own the shares from day one, and the company's right to buy back the unvested ones lapses over time.
When does vesting start?
On the date the agreement names. For an employee it is often the first day of work. For founders it is often the day the founders' agreement is signed, or an earlier date they agree on.
What is a common vesting schedule?
Four years with a one year cliff: nothing in the first year, a quarter at the first anniversary, and the rest monthly over the next three years. The NVCA model documents and Carta describe it as the usual structure. It is a convention, not a legal requirement.
How does vesting protect an early company?
It keeps shares for the people who stay. If someone leaves early, unvested options return to the pool, or the company buys back the unvested founder shares, ready for whoever replaces them.
What is a cliff?
A waiting period at the start, usually one year, during which nothing vests. At the cliff a whole block vests at once. It protects the company from giving shares to someone who leaves after a few weeks.
How do I set vesting for an advisor or a consultant?
Tie it to time or to clear milestones, such as a product launch, and keep it shorter than an employee's schedule. Write it in a signed agreement.
What goes wrong when vesting is ignored?
When someone leaves, nobody knows what they keep. The disputes that follow are expensive and can scare off the next investor.
What happens to vesting when the company is sold?
It depends on the agreement. With double trigger acceleration, unvested options vest early only if both things happen: the company is sold and the person is then let go without cause. Educational material, not legal or tax advice. Check your own case with a lawyer or an accountant.
What is vesting in simple words?
Earning your shares by staying: a little more becomes yours each month you keep working.
How does vesting work with tax in Israel?
Employee options in Israel are commonly granted under section 102 of the Income Tax Ordinance, through a trustee, and that track has a holding period of its own, separate from the vesting schedule. Ask your accountant which track your plan uses. Educational material, not legal or tax advice. Check your own case with a lawyer or an accountant.
Do I need an accountant for vesting?
Yes. Your accountant should see the plan before grants are made, because vesting and exercise can have tax consequences for the holder. The monthly tracking itself fits in the cap table. Educational material, not legal or tax advice. Check your own case with a lawyer or an accountant.
Does vesting cost the company money?
No. It is a clause in the grant or in the founders' agreement, not an expense. Drafting it is part of the lawyer's work on those agreements.

Sources: NVCA model legal documents (nvca.org), checked September 2026, Carta Learn, stock option vesting (carta.com/learn), checked September 2026, Income Tax Ordinance [New Version] 5721-1961, section 102

Last reviewed: 2026-09-24

I have worked with

What Clients Say

From different fields, at different stages of business

Dan Manto

Eclipse Capital

Real Estate Investment and Finance, USA

Arty McLabin

GameReady

Game Development Education and Outsourcing, International

Anna, Beautician

Anna

Beautician

After I finished a cosmetology course at a leading company, I was confused. I didn't know how to open a business, what to sell from home, or how to bring in clients. Since I reached out to Mobius, everything has changed. We built an organized plan with clear steps and no unnecessary risks. Today I see results, and I'm growing and developing every month.

Mark, Massage therapist, Gan Yavne

Mark

Massage therapist, Gan Yavne

When I finished a massage course, I imagined a different world. I found out it's a hard field, and financial stability isn't easy to find. When I came to Mobius, something changed. We started an organized process and built a business plan. Without Mobius? I probably would have given up. Today I believe in myself and in my own path.

Building a startup and facing this decision?

Alex advises Israeli founders on fundraising, equity and growth. The first call is free.

+972 055-248-6151. Better on WhatsApp: I am in meetings most of the day and answer as soon as I am free.