Cliff vesting means equity does not vest at all until a specified waiting period elapses; at the cliff date, a predetermined portion vests in a lump sum.

How it works

A typical new hire grant might vest 25% after one year (the cliff), then 1/48 per month for the next three years. Until month 12, the grant is 0% vested. On the cliff date, 25% vests; each month after adds roughly 2%. Founders often buy restricted stock subject to the same repurchase right that lapses as vesting occurs—functionally a cliff vesting pattern. Boards can approve different cliffs (six months for advisors, none for rare retention grants). Vesting is usually tied to continued service; termination stops the clock unless the plan provides partial acceleration. ISO and NSO option plans must comply with tax rules, but the cliff concept is the same across instrument types.

Why it matters

• Founders: Your headline ownership percentage overstates what you keep if you leave early. Cliffs protect co-founder alignment and are standard in venture term sheets.
• Operators: Recruiting conversations should spell out cliff timing so hires understand when equity becomes real. Leaving at month 11 versus month 13 can mean a large difference.
• Investors: Term sheets often require founder vesting refresh or re-vesting on investment so prior unvested shares do not create misalignment.

Common mistake

Assuming vesting starts on the offer letter date rather than the grant start date set in the equity plan—those can differ by weeks and shift cliff timing.

Related ideas

Cliff unlock, vesting schedule, repurchase right, stock options, and single-trigger versus double-trigger acceleration appear in the same equity conversations.