Deal Terms
Cliff Vesting
A vesting provision where no equity is earned until a specified period (usually one year) has passed, after which a large chunk vests at once.
Cliff vesting requires an employee to remain with the company for a minimum period before any equity vests. The standard startup structure is a 4-year vesting schedule with a 1-year cliff — meaning 25% vests after year one, then the remainder vests monthly or quarterly.
In Practice
An engineer with 10,000 options on a 4-year schedule with a 1-year cliff earns nothing for 12 months, then 2,500 options vest on their 1-year anniversary, with ~208 options vesting each subsequent month.
Why It Matters
The cliff protects companies from giving equity to short-term employees. For employees, it creates a strong incentive to stay at least through the cliff date.
VC Beast Take
The cliff is a loyalty test disguised as a vesting provision. It ensures both sides are committed before equity changes hands.
Related Concepts
Further Reading
How Vesting Works at Startups: Cliffs, Schedules, and Acceleration
Your equity doesn't belong to you all at once. Vesting determines when you actually earn your shares — and what happens to them if you leave early, get fired, or the company gets acquired.
Startup Equity Compensation Explained: Stock Options, RSUs, and More
ISOs, NSOs, RSUs, restricted stock — startup equity comes in many flavors. Here's what each type actually means for your compensation, your taxes, and your financial future.
How to Negotiate a Term Sheet as a First-Time Founder
Your first term sheet is exciting and terrifying. Know what's negotiable, what's standard, and the practical tactics for pushing back on liquidation preferences, board seats, and protective provisions.
How to Negotiate Your Term Sheet: A Founder's Playbook
A tactical guide to negotiating your startup term sheet — which terms matter most, where to push back, and how to protect your interests without killing the deal.
How to Read a Term Sheet: A Practical Breakdown
Term sheets aren't designed to be readable. Here's a section-by-section guide to what matters, what's standard, and what should make you walk away.
Term Sheet Explained: Every Clause Founders Must Know
Term sheets are dense, jargon-heavy, and consequential. Here's a founder-friendly breakdown of every major clause and what it means for your company.
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