Vesting Cliff
A minimum period, typically one year, that must pass before any equity vests at all under a vesting schedule.
A cliff is the initial waiting period in a vesting schedule during which no shares vest at all; if the person leaves before the cliff, they walk away with nothing from that grant. Once the cliff passes, a lump sum of shares (usually 25% for a standard four-year schedule) vests immediately, and the remainder vests monthly or quarterly thereafter.
The standard one-year cliff exists to protect the company from a new hire or co-founder who leaves within the first few months, since equity that vested from day one would let someone earn meaningful ownership for a very short tenure.
The cliff is the cheapest insurance a startup has against short-tenure equity giveaways. Without it, someone who contributes for a few months and leaves would keep a stake that sits on the cap table forever as dead equity. With a one-year cliff, the company keeps the whole grant unless the person stays a full year.
Each new grant usually carries its own schedule and its own cliff, measured from that grant's vesting commencement date. Document the commencement date explicitly — misaligned or backdated start dates create disputes about when the cliff actually hits.
The cliff only gates vesting. Once someone with vested options leaves, the plan's post-termination exercise window still applies, and acceleration terms — single-trigger on an acquisition alone, or double-trigger on an acquisition plus termination — are negotiated separately.
An employee is granted 40,000 options on a standard four-year schedule with a one-year cliff. If they leave after eight months, they vest nothing; if they leave after fourteen months, they've vested 25% (10,000 shares) at the twelve-month mark, plus roughly two more months of monthly vesting.
A one-year cliff is standard and worth holding firm on for every grant, including founders — the rare cases of no-cliff or short-cliff grants tend to be reserved for very senior late-stage hires with unusual negotiating leverage.
What happens to equity if someone leaves before the cliff?
They forfeit the entire unvested grant — nothing vests until the cliff date is reached, which is the whole point of the cliff as a retention mechanism.
Why is the standard cliff one year?
A year is long enough to judge a hire's real contribution and fit, and short enough that good candidates accept it as normal. Shorter cliffs give away equity before the company knows what it got; longer ones make offers uncompetitive.
Can a vesting cliff be negotiated?
Sometimes, at the margins. Senior executives occasionally win a shorter cliff or partial acceleration; for founders whose stock is re-vested at a priced round, see the Founder Vesting entry.
Does a refresher grant have its own cliff?
Usually yes. Each grant has its own vesting schedule, often with a cliff measured from that grant's vesting commencement date.
Related terms
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