When start-ups are founded, it is often Vesting is the talk of the town. But what exactly is behind it - and why is it particularly important for start-up teams?
1. definition: What does vesting mean?
Vesting is an agreement in which Shares in a company are only „earned“ over time.
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- Instead of receiving all shares immediately, a founder or employee receives the shares gradually, depending on how long he or she stays with the company or achieves certain targets.
- Objective: To ensure that everyone involved remains motivated in the long term and does not leave the start-up prematurely.
2. typical structure of a vesting agreement
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- term (vesting period): Usually 3-4 years.
- Cliff period: There is often an initial vesting period of 12 months. No shares are „earned“ during this period. Once the cliff has expired, the first shares are released.
- Monthly or quarterly release: After the cliff, the remaining shares are regularly „earned“.
Example:
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- Founder:in A receives 25 % of the shares on a vesting basis over 4 years.
- Cliff: 12 months → after 1 year he receives 6.25 %.
- Thereafter, the remainder of the 25 % will be released monthly over the next 36 months.
3. the advantages
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- Security for the team: Founders or employees who leave early do not immediately retain large shares.
- Motivation: Everyone involved is focussed on the long-term growth of the start-up.
- Attractive for investors: You can see that key personnel are committed for the long term.
4 When does vesting make sense?
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- Founder:inside teams: It prevents later conflicts when several founders leave the company.
- Employee shareholdings: Startups often give shares or options to employees in order to retain them in the long term.
- Financing rounds: Investors often demand vesting rules before they invest.
5. conclusion
A vesting agreement is a Key instrument for fair share distribution and long-term motivation. It protects the start-up against the premature loss of key personnel and ensures that everyone only receives their share if they actually contribute to the company's success.
Tip: Always leave such an agreement Set up legally clean, to avoid disputes later on.