Glossary
What is vesting, and what is a cliff?
Also known as: Vesting schedule, Cliff.
Vesting is the mechanism by which a grant of equity is earned over time rather than all at once, and the cliff is an initial period, often a year, before which none of it vests and after which the first portion vests in a single step.
A common schedule is four years with a one-year cliff: nothing for the first year, a quarter at the cliff, then the rest in regular instalments. The point is to tie the reward to continued service, so someone who leaves early keeps only what has vested.
Vesting mechanics are the same wherever the company is incorporated; what differs is the tax and the paperwork around exercise. A calculator can show what is vested on a date from the grant, the cliff and the schedule, counting units rather than money.
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