Founder Dilution / Founder Vesting

Definition

Founder ownership gradually vesting (often over 4 years) as a control mechanism for early departures. It's structured to make founders feel like they own 30% when they really own 0% until they've served their time.

Example Usage

Our founders all have 4-year vesting schedules with 1-year cliffs, so if we're acquired in year 1, the founders get approximately nothing.

Origin

Employment contract terminology adapted to startups

Fun Fact

Single-founder acquisitions within vesting periods have produced the most bitter founder lawsuits in startup history

Source: Startup employment and equity terminology

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