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

Reverse vesting is a mechanism where founders receive their shares upfront but must earn them over time, with unvested shares subject to buyback if they leave early.

Reverse Vesting Meaning

The reverse vesting meaning centres on aligning founder retention with long-term company success. To define reverse vesting in practice, founders hold all their shares from day one, but the company has the right to repurchase unvested shares, usually at nominal value, if a founder departs before their vesting schedule ends. A clear reverse vesting definition is crucial for investors, as it ensures that equity reflects continued commitment and protects the business from inactive or departing founders retaining large stakes. Reverse vesting stands for stability, fairness and incentive alignment in early-stage teams.

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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.