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by Undo Capital
February 12, 2026
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What Is Time-Based Vesting?

Time-based vesting is a vesting structure where equity or share options are earned gradually over a set period, based purely on continued employment or service.

Time-Based Vesting Meaning

The time-based vesting meaning centres on rewarding long-term commitment. To define time-based vesting in practice, equity typically vests monthly or annually over a multi-year schedule, commonly four years, with a one-year cliff. This means no equity vests until the cliff is reached, after which vesting continues proportionally. A clear time-based vesting definition is essential because it aligns incentives, helps retain key talent and protects companies from granting large ownership stakes to individuals who leave early. Time-based vesting stands for stability, fairness and a structured approach to distributing equity over time.

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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.