A vesting cliff is the minimum time period — typically one year — an employee or co-founder must remain with the company before any equity begins to vest. After the cliff, vesting continues incrementally (monthly or quarterly) over the remaining schedule.
Standard startup equity grants use a '4-year vest with 1-year cliff' structure: zero equity vests in the first 12 months; on month 12 (the cliff), 25% vests all at once; then 1/48th vests each subsequent month until fully vested at month 48. The cliff protects the company if a hire or co-founder leaves early — they walk away with nothing if they leave before the cliff. The cliff serves two functions. Operationally, it screens for genuine commitment — a co-founder or key hire who leaves in month 11 contributed meaningfully but not sufficiently to justify a full ownership stake. Financially, it protects cap table integrity — allowing early departures to vest small slivers would create a large pool of small, disengaged shareholders. For co-founders, vesting cliffs are particularly important. Without a cliff, a departing co-founder takes their full equity stake with them, often to a competitor or to do nothing — leaving remaining founders owning a smaller proportion of a company they're building alone. Investor term sheets typically require founder vesting (or acceleration provisions) as a condition of investment. Acceleration provisions modify cliff logic in specific scenarios: 'single-trigger' acceleration vests all unvested equity on a change of control (acquisition). 'Double-trigger' requires both a change of control AND involuntary termination. Double-trigger is more standard today — single-trigger creates large equity overhang that can impede acquisition negotiations.
You forfeit all unvested equity. If you leave before the cliff, you receive nothing from your equity grant. The unvested shares typically return to the company's option pool for future grants. If you leave after the cliff but before full vesting, you keep what has vested to that point.
Yes, and this is often more important for co-founders than employees. Investors almost always require founder vesting as a condition of investment. Common structure: co-founders agree to vesting at incorporation or when first outside capital is raised, with credit given for time already served if the company is 12+ months old.
Yes. Senior hires often negotiate for a shorter cliff (6 months), faster vesting (3-year instead of 4-year), or partial acceleration on termination. Late-stage hires sometimes receive grants with immediate partial vesting of 10–25% to compensate for lower-risk perception vs. an early employee. Everything is negotiable; 4-year/1-year is the default, not a requirement.