# Vesting

Vesting is a technique used to allow option holders to earn their equity over time. This prevents an option holder from purchasing stock upfront, and instead spreads the option to buy over time at a specific price set on issuance.

Vesting is most often a function of time, but can also be based on events or milestones (e.g. company performance). Currently, Gust Equity Management only collects parameters for temporal vesting.

A **vesting schedule **is what defines both when and how many options can be exercised, and is collected using these parameters:

#### Vesting Term

The length of time until the options are fully vested, in Gust Equity Management this is defined in months.

#### Vesting Cliff (Months)

The length of time in months until the first vesting milestone, where a defined percentage (the vesting cliff %) of the option grant is vested.

#### Vesting Cliff %

The percentage of the option grant that is vested at the cliff.

#### Post Cliff Frequency

The frequency that the remainder of the grant, after the cliff, will vest evenly over time.

**For example:**An option grant has a 4 year term, where 25% vests at a one year cliff with monthly vesting thereafter.

The one year cliff is the first vesting milestone. If the option holders leaves the company before the one year anniversary, the entire grant is forfeited. After the cliff the vesting iterates monthly, so think about the entire grant term as 48 months. On the cliff date, 25% of the grant vests, or 12/48ths. Each successive month an additional 1/48th vests, which will look something like this:

After 48 months the entire stock option grant will have vested. If the option holder leaves at any point, they can exercise only what's vested and will forfeit the remainder of the unvested options. For example, if they left after 30 months then 30/48ths can be vested.