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Vesting refers to the process through which employees earn ownership of certain benefits or assets, like shares in the company, over time. The main idea behind vesting is to incentivize employees to stay at the company for a longer period and contribute to its success.
In the context of startups, vesting schedules are typically applied to the equity or stock options granted to founders, employees, and other early stakeholders. A common vesting schedule is a "four-year vest with a one-year cliff," meaning that if an employee leaves before one year, they get no equity, but after the first year, 25% of their equity vests, and the remaining vests monthly over the next three years. Vesting helps align the long-term interests of employees and the company and ensures that those who contribute most to the company's success are rewarded appropriately.
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