Vesting cliff
Cliff vesting · One-year cliffA vesting cliff is the opening stretch of a vesting schedule in which nothing vests at all. On the cliff date the whole of that stretch vests in one tranche, and the schedule carries on in smaller steps: on a four-year schedule with a one-year cliff, a quarter of the grant vests on the first anniversary.
What is a vesting cliff?
On a four-year schedule with a one-year cliff, a quarter of the grant vests on the cliff date, and the rest in the steps the schedule sets until the fourth anniversary. A schedule can also have no cliff, or a cliff of another length; the grant states it in months.
The cliff is counted from the schedule's start date, which the grant states. On a four-year schedule with a one-year cliff, the cliff tranche is the largest single vest.
Vested is not the same as owned. A vested option still has to be exercised, at its strike, before the share is held. A vested RSU settles into shares, net of withholding.
How a vesting cliff works, with numbers
A grant of 4,800 options vests over four years with a one-year cliff, monthly after that. Nothing vests for twelve months; on the cliff date 1,200 options vest, a quarter of the grant. The remaining 3,600 vest at 100 a month for 36 months.
Leaving in month 11 forfeits all 4,800. Leaving in month 18 keeps 1,800: the cliff tranche and six monthly tranches.
- Cliff tranche (12 of 48 months)
- 1,200
- Monthly after the cliff (3,600 ÷ 36)
- 100
- Six months past the cliff
- + 600
- Vested at month 18
- 1,800
Why a vesting cliff matters
The cliff turns the first anniversary into a step. A day before it, the grant is worth nothing to someone who leaves; a day after, a quarter of it is vested and stays vested.
The cliff date is also the first date anything can be done with the grant: the first possible exercise for options without early exercise, and for RSUs the first wage event of the grant, with withholding to match.
A later grant carries its own start date and its own schedule, so a person's vesting can be several schedules stacked, each stepping on its own dates.
Vesting cliff in Taiga Finance
In Taiga Finance a grant's drawer draws its schedule as a stepped line and marks the cliff on it with the shares that vest that day (a 15,000-share grant reads “CLIFF · 4K SH”). The grant record states the schedule in one line, “4 yr · 1 yr cliff · monthly”, with the cliff in months and the final vest date beside it.
The Next vest readout on the Equity Comp page gives the date, share count and value of the next tranche across every grant, and tags it “cliff” when that is what it is. A schedule is entered per grant, as a preset or as vesting years, cliff months and cadence.
Equity compensation →Key takeaways: Vesting cliff
- A vesting cliff is a period at the start of a schedule in which nothing vests, ending in one large tranche.
- On a four-year schedule with a one-year cliff, a quarter vests on the first anniversary and the rest in equal steps to the fourth.
- Leaving before the cliff forfeits the whole grant; leaving after it keeps what has vested.
- The cliff is counted from the schedule's start date, which the grant states.
Questions about Vesting cliff
What is a vesting cliff?
The first part of a vesting schedule in which no shares vest. On the cliff date the shares for that whole period vest at once, and the schedule continues in smaller tranches.
How does a one-year cliff work?
For twelve months from the schedule's start date, nothing vests. On the cliff date the first year's share of the grant vests in one tranche: a quarter of a four-year grant. Someone who leaves before that date keeps none of it.
What does a four-year vest with a one-year cliff mean?
A quarter of the grant vests on the first anniversary, and the remaining three quarters vest in the steps the schedule sets over the next three years. On 4,800 shares vesting monthly after the cliff, that is 1,200 at the cliff and then 100 a month.
Does Taiga Finance show when a cliff vests?
Yes. A grant's drawer marks the cliff on its schedule chart with the share count that vests that day, and the Next vest readout on the Equity Comp page tags the coming tranche “cliff” when it is one.