VC founder vesting terms: what investors require

VC founder vesting terms are close to fixed. Expect four-year vesting with a one-year cliff on founder shares, reverse vesting if your shares are already fully owned, and double trigger acceleration on a sale. You can negotiate the details, mainly credit for time served. Whether vesting applies at all is not usually up for discussion.

Why do VCs require founder vesting?

To protect their money. An investor is betting that the team stays and builds for years. Without vesting, a founder can leave six months after the round closes and keep a large stake, while the rest of the team works for someone who left.

Cooley's guide to founder's stock and vesting says venture and angel investors generally seek some kind of vesting, and that it may be imposed as a condition of investment. Investors apply it to every team, however committed the founders seem in the room. Treating it as a bargaining chip mostly signals inexperience.

What is the standard founder vesting schedule?

Four years with a one-year cliff:

If your cap table already shows this, it rarely comes up in diligence. It just confirms what the investor expected. For the mechanics, read our guide to the cofounder vesting schedule.

What happens if you are already fully vested?

Expect reverse vesting. Plenty of founders raise their first institutional round years after starting, by which time their shares are fully theirs. A lead investor wants the same protection a fresh grant would give.

Reverse vesting means founder stock already issued becomes subject to a vesting schedule, and unvested shares can be bought back by the company if the founder leaves early.

This is where you have room to negotiate. Cooley notes founders are often given some retroactive vesting credit for work done before. If you have built for two or three years, ask for credit that shortens the new schedule rather than a fresh four-year clock. Go in expecting a talk about how much credit you get.

Single trigger or double trigger acceleration?

Investors want double trigger. Acceleration decides what happens to unvested shares when the company is sold:

• Single trigger. The sale alone vests everything.
• Double trigger. Vesting speeds up only if the sale is followed by the founder being let go without cause, or leaving for good reason.

With single trigger, a founder can resign the day after the deal with nothing left to earn. Pulley's guide to single and double trigger acceleration notes that investors may shy away from single trigger clauses because a sale could lead to retention problems with top people. Our explainer on vesting acceleration covers how these clauses work when someone leaves.

What does the term sheet clause say?

A sentence or two, and almost never drafted from scratch. It usually says founder shares will vest over four years with a one-year cliff, monthly after that, and that the company can buy back unvested shares at the lower of cost or fair market value if a founder leaves. Where reverse vesting applies, it sets the new schedule and any credit for past work. Acceleration, if included, is usually double trigger.

Investors care less about the wording than about whether your cap table already matches it, with no side deals or verbal promises between co-founders. See the questions VCs ask about your cofounder relationship.

How should founders prepare before a raise?

Put standard vesting in place long before a term sheet arrives. If you set it up while raising, you do it under time pressure with the investor's lawyer setting the terms.

1. Check your current vesting against the four-year, one-year-cliff default.
2. Fix gaps now, while you can choose the structure yourselves.
3. Write down what you agreed on roles, equity and what happens if someone leaves, so the paperwork matches your understanding.
4. Compare your answers privately with the cofounder alignment check before an investor does it for you.

The resources library has templates for roles, equity and decision rights.