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by Undo Capital
December 15, 2025
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What Is Performance Vesting?

Performance vesting is a vesting structure where shares or options vest only when specific business or personal performance targets are achieved.

Performance Vesting Meaning

The performance vesting meaning centres on linking equity rewards directly to measurable success. To define performance vesting in practice, instead of vesting purely over time, equity becomes exercisable only when predefined milestones, such as revenue targets, product launches, profitability or exit outcomes, are met. A clear performance vesting definition is important because it tightly aligns employee, founder or executive incentives with the company’s strategic goals. Performance vesting is commonly used in management incentive plans, growth share structures and senior compensation packages to reward real value creation rather than tenure alone.

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Disclaimer: Our services are designed to assist startups and businesses with company formation, legal agreements, and funding-related documentation. We do not provide investment advice, financial advice, or tax advice, nor are we regulated by the Financial Conduct Authority (FCA). Participating in startups and early-stage enterprises carries inherent risks, including limited liquidity, absence of dividends, potential loss of investment, and dilution. Any decisions regarding investments should be made independently by the investor as part of a well-diversified portfolio.