A vesting cliff is a waiting period, most commonly one year, during which an employee or founder earns no equity at all. If they leave before the cliff, they walk away with nothing; once they hit it, a large chunk of their equity vests all at once. It’s a standard protection, not a red flag, when used at typical terms.

How a standard vesting schedule with a cliff works

The most common structure in startups is a four-year vesting schedule with a one-year cliff. For the first 12 months, the person holds no vested equity whatsoever. On their one-year anniversary, 25% of their total grant vests immediately. After that, the remaining equity typically vests monthly or quarterly over the remaining three years.

Why companies use cliffs at all

A cliff protects the company and the other founders or shareholders from having to give real equity to someone who leaves, or is let go, within the first few months. Without a cliff, a co-founder or early employee who quits after six weeks would still walk away owning a piece of the company, which most teams consider an unfair outcome given how little time and value they actually contributed.

What happens if you leave right before the cliff

This is the scenario that causes the most frustration: someone who leaves at 11 months gets nothing, while someone who stays one more month gets 25% of four years’ worth of equity. That sharp cutoff is intentional, meant to discourage people from leaving right before their equity would start vesting.

Frequently asked questions

What’s the most common vesting cliff length?

One year is the standard cliff length in most startup equity grants, paired with a four-year total vesting schedule.

Do founders also have vesting cliffs?

Yes, many startups now put founders on the same vesting schedule as employees, partly to protect the company if a co-founder leaves early.

What happens to unvested equity if someone is fired before the cliff?

They typically forfeit all of it, since nothing has vested yet at that point.

For more startup fundamentals, see Talmyn’s Business & Economics desk.