Equity vesting in your offer
An equity grant in an offer is a promise of ownership that arrives on a schedule. Vesting is the schedule. Until a share or option has vested, it isn't yours, and the offer will usually say what happens to the unvested part if you leave.
What it's for
Equity is deferred: it's meant to be worth more the longer you stay, and worth nothing if you leave early. The vesting schedule is how that is engineered. A cliff — a period at the start where nothing vests at all — is there so that a short stay earns no equity.
How it shows up in an offer
"Subject to approval by the Board, you will be granted an option to purchase 20,000 shares of common stock at the fair market value on the date of grant. The option will vest over four years, with 25% vesting on the first anniversary of your vesting commencement date and the remainder vesting in equal monthly instalments thereafter, subject to your continued service. The option will be governed by the Company's Equity Incentive Plan and your option agreement."
You're being offered the right to buy 20,000 shares at a price set on the day the board approves the grant — not today, and not yet. Nothing vests for the first year. On the one-year mark, a quarter (5,000) vests at once; after that, 1/48 of the total (about 417) vests each month for three more years. If you leave at month eleven, you have nothing. Two documents you haven't seen — the Plan and the option agreement — govern the details, including what happens after you leave.
What to check in yours
- Options or RSUs. An option is a right to buy at a set price; an RSU is a share delivered to you when it vests. They're taxed differently and behave differently if the company's value falls. Know which one you're being offered.
- The number, and what it's a share of. "20,000 shares" means nothing without the total outstanding. Whether the letter gives you the percentage, or the fully diluted share count, is worth noting — many don't.
- The strike price, if options. Often "fair market value on the date of grant," which means it isn't known yet. Ask what the most recent valuation was.
- The cliff. Twelve months is what you'll see most. Find yours, and find whether the cliff is measured from your start date or from a "vesting commencement date" that may be later.
- The schedule after the cliff. Monthly, quarterly, or annually. Monthly is more granular; annual means another whole year between vests.
- What happens when you leave. Usually in the plan, not the letter. Two things matter: unvested equity is normally forfeited, and vested options usually have a window after departure — often 90 days — in which you must exercise (pay for them) or lose them. That exercise window is one of the most consequential numbers in the whole package and is almost never in the offer letter. Ask for the plan.
- Acceleration. Some grants vest faster, or fully, if the company is acquired ("single trigger") or if it's acquired and you're let go ("double trigger"). If it's not mentioned, assume there is none.
- "Subject to Board approval." The grant isn't made until the board acts. Usually routine; occasionally delayed. Your vesting commencement date should not wait for it, but check.
Where a lawyer, or an accountant, comes in
Tax on equity depends on the type of grant, your jurisdiction, and timing, and it can be the largest number in the package. That's an accountant's question, and worth asking before you sign rather than at tax time. Whether the plan's leaver provisions are fair, and what your rights are if the company is sold, are a lawyer's. The report reads the offer's equity language line by line, lists every document it points to that you haven't seen, and tells you which question to bring to which professional.
This page explains what a clause says and what to look for in your own offer. It doesn't tell you what the law is where you work or whether a clause would be enforced — that's a question for an employment lawyer, and the page says so where it applies. Informational, not legal advice.