Equity, Ownership & Dilution Beginner

Vested Shares

Shares or options you have earned through time-based or milestone-based vesting.

Definition

Vested shares are the portion of your equity grant that you have earned and have the right to keep (or exercise, in the case of options) even if you leave the company. Vesting typically occurs over four years, with shares vesting monthly or quarterly after an initial one-year cliff. Only vested options can be exercised.

Why it matters

Only your vested shares matter when you leave. If you quit after 2 years of a 4-year vesting schedule, you have earned 50% of your grant. The other 50% goes back to the company's option pool.

Example

You received 40,000 options with a 4-year vesting schedule and 1-year cliff. After the cliff, 10,000 vest. Then approximately 833 vest each month. After 2.5 years, you have 25,000 vested options.

Related terms

Unvested Shares
Shares or options you have been granted but have not yet earned through vesting.
Vesting
The process of earning your equity over time, typically over a four-year period.
Vesting Cliff
The initial period (usually one year) during which no equity vests at all.
Vesting Schedule
The timeline and cadence at which your equity grant becomes yours (e.g., 4 years with 1-year cliff).
Exercise
The act of paying the strike price to convert your stock options into actual shares.
Stock Options
The right to buy company shares at a fixed price (strike price), granted as compensation.

More from Equity, Ownership & Dilution

This definition is an educational summary. It is not legal, tax, or investment advice. Specific terms in your equity grant or company documents may differ.