Vesting refers to a condition by which investors bind entrepreneurs to work for the company in the manner the investors wish. This usually means that the number of ”free shares” of the entrepreneurs grows either 1) within a specific time and/or 2) on the basis of specific achievements. A table could look as follows:
| Time | or Target/ achievement | Free shares |
|---|---|---|
| 6 months from investment | Prototype ready | 20% |
| 12 months from investment | First delivery | 40% |
| 24 months from investment | Cash flow in > cash flow out | 75% |
| 30 months | Turnover over EUR 1 million | 100% |
Free shares refer to those shares which entrepreneurs do not need to relinquish should they have to (voluntarily or involuntarily) discontinue day-to-day work for the company. Vesting arrangements secure primarily the company’s possibilities to continue operations, as the shares of a shareholder who has exited can be transferred to a potential successor or to other shareholders who want to continue to fully participate in taking the company forward.