Vesting acceleration is the concept of speeding up the vesting of a person’s equity under specific conditions. Two main types are “single-trigger acceleration” and “double-trigger acceleration.”
Single-trigger acceleration allows a portion of a person’s unvested equity to vest when a single condition, or trigger, is met. A common trigger is the company’s acquisition. In this case, a person with “100% single-trigger acceleration” would have all their unvested shares vest if the company is acquired.
Double-trigger acceleration requires two conditions to be met. Typically, these are the company’s acquisition (first trigger) and the termination of the person’s employment (second trigger). So, a person with “100% double-trigger acceleration” would have all their unvested shares vest only if the company is acquired and their employment is terminated post-acquisition.
While there can be countless variations in acceleration amounts, the number of triggers, and what constitutes a trigger, unusual arrangements are generally not worth considering. Traditional single-trigger and double-trigger acceleration provisions can already deter investors as they may render a company less attractive to potential buyers. With single-trigger acceleration, employees may not be incentivized to remain with a company post-acquisition. Although double-trigger acceleration offers a more balanced approach, potential buyers may still feel constrained by the obligation to accelerate an employee’s share vesting if they decide to terminate that employee following an acquisition. Considering this potential deterrent, vesting acceleration is usually limited and reserved for a startup’s key employees.