Cliff Period
/klɪf ˈpɪəriəd/
A cliff period is a specific waiting time before any equity or shares begin to vest, after which the accumulated portion releases all at once.
A cliff period is a specific waiting time before any equity or shares begin to vest, after which the accumulated portion releases all at once.
A cliff period acts as a trial period where no shares vest until you reach a specific date - typically 12 months.
Once you pass that cliff date, you receive all the shares that would have accumulated during that time in one go, and then normal vesting continues from there.
Companies use cliff periods to protect themselves from co-founders or employees who leave very early on.
It ensures that everyone commits for a meaningful period before earning any equity, which prevents ownership from fragmenting amongst people who didn't stay long enough to contribute substantially.
If you leave before completing the cliff period, you typically receive no equity at all, even if you were just days away from reaching the cliff date.
This is why understanding your cliff period terms is crucial before accepting any equity offer.
The standard cliff period is 12 months, though some companies set it at 6 months or occasionally 3 months.
Following the cliff period, shares usually continue to vest monthly or quarterly over the remaining vesting schedule, commonly totalling 4 years overall.
A cliff period is the initial waiting period with no vesting at all, whilst vesting is the gradual earning of shares over time.
Think of the cliff as the entrance requirement - you must reach it to start earning anything - and vesting as the ongoing process of earning your full allocation afterwards.
Yes, cliff period terms are negotiable, particularly for senior hires or co-founders.
You might negotiate a shorter cliff, immediate partial vesting, or acceleration clauses that speed up vesting under certain conditions like company acquisition or termination without cause.
