Vesting cliff

An initial period in a vesting schedule during which no shares or options vest, after which a first portion vests at once.

Example

With a one-year cliff, a founder who leaves after eight months vests nothing.

Important

Cliffs protect a company from people who leave very early.

Related terms

• Vesting Schedule — The timetable over which employer contributions or equity become fully owned by an employee.
• Leaver provisions — Terms setting out what happens to a departing founder's or employee's shares, often distinguishing good leavers from bad leavers.

Lessons that explain it

• A founder who leaves without vesting can own a third of the company forever — Founder agreements, vesting and leaver provisions decide what happens when a founder departs. Diligence confirms they exist, are signed and would work as intended. (10 min)

All 578 terms in the Investing glossary