Deal Terms
Last updated
Quick Answer
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.
VC Term Sheet Template & Guide: Every Clause Explained with Examples
A clause-by-clause breakdown of every standard VC term sheet provision — what each term means, what's market, what to negotiate, and the red flags that cost founders millions.
How to Write an LPA: The Limited Partnership Agreement Guide for Fund Managers
A practical 2026 guide for venture capital and private equity fund managers on drafting, negotiating, and operating under a Limited Partnership Agreement (LPA): key sections, ILPA standards, costs, lawyer selection, and common mistakes.
Venture Capital Due Diligence Checklist: 75+ Items Every Investor Should Verify
The definitive VC due diligence checklist: 75+ items across team, market, product, financials, legal, and customers. Know exactly what to verify before writing a check.
Venture Capital Salary & Compensation Guide 2026: Every Level Explained
A detailed breakdown of 2026 venture capital compensation across every role—from analyst to managing partner—including salary bands, bonus structures, carry mechanics, fund size effects, geography adjustments, and negotiation tactics.
Cap Table Explained: Examples, Templates, and How to Build One
A cap table tracks who owns what in your startup. We walk through a real cap table example from founding through Series A — with templates, formulas, and dilution math.
What Is Carried Interest and How Does It Work? (With Math)
Carry is how VCs get rich — or don't. Walk through the real math: 3 fund scenarios, hurdle rates, European vs American waterfalls, and why 20% of profits isn't as simple as it sounds.
How to Set Up a Startup Option Pool: ESOP Guide for Founders
Setting up your employee option pool wrong costs you money and credibility. Here's the complete playbook: pool sizing, option vs RSU, ISO vs NSO, vesting schedules, and tax implications.
How to Read a Term Sheet: Line-by-Line Guide for Founders
Every major term sheet clause decoded: liquidation preference, board composition, anti-dilution, vesting, protective provisions, and more. With a negotiation priority list at the end.
How to Build and Manage a Cap Table
A step-by-step guide to building and managing your startup cap table from incorporation through Series A, including founder vesting, SAFEs, option pools, and tool recommendations.
Understanding Startup Equity and Dilution: A Complete Guide
How equity actually works, what dilution really means, and what founders take home in different exit scenarios. Real math, worked examples, no hand-waving.
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.
Understanding Cliff Vesting is critical for founders navigating the fundraising process. It directly impacts deal terms, valuation, and the relationship between founders and investors.
Cliff Vesting falls under the deal-terms category in venture capital. This area covers concepts related to the financial and legal terms that define investment agreements.
Newsletter
Join thousands of founders and investors. Every Tuesday.
The VC Beast Brief
Master VC terminology
Get smarter about venture capital every week. Our newsletter breaks down the terms, concepts, and strategies that matter.
VentureKit
Ready to launch your fund?