Typically, equity is subject to four-year vesting, meaning co-founders must work for four years to fully earn their equity stake, along with a one-year cliff where no equity is earned if they leave or are fired within the first year. Vesting with a one-year cliff acts as a safety mechanism, allowing you to correct any poor decisions about co-founders without long-term harm to the company.

Vesting means that founders gain full ownership of their stock over time, and if they leave before the vesting period ends, they may lose unvested shares.

Equity should vest over time, meaning co-founders earn their shares gradually, and cliffs ensure they must stay for a minimum period to receive any equity.

Before distributing equity, consider how many people you need to hire and how much equity you plan to allocate for their compensation. The first employee at a traditional Silicon Valley startup typically receives between one and two percent equity.

If a co-founder leaves or is fired before their one-year cliff, it's typical for them to receive only a small amount of equity, usually between 2% to 5%.

Single founders should implement vesting on their shares to set a cultural example for employees, demonstrating that everyone is committed to the long-term success of the company.

Vesting is crucial for founders because it prevents a situation where a founder leaves the company and takes a significant portion of equity with them, which would be unfair to the remaining founders.

The primary safety mechanism for giving equity is implementing vesting and a cliff, which ensures that co-founders earn their equity over time.

Founders need to be incentivized to continue working on their startup; without vesting, they could walk away with full ownership at any time, which undermines their commitment to the company.