What Is Cliff?
A cliff is the initial waiting period in a vesting schedule during which no shares or options vest, after which a large portion vests all at once if the person is still with the company.
Cliff Meaning
The cliff's meaning in equity arrangements is about commitment and protection. A common cliff definition is a one-year cliff within a four-year vesting schedule, where nothing vests until the first anniversary, and then a set percentage becomes vested immediately. If the individual leaves before the cliff ends, they receive no equity at all. In practice, the cliff stands for safeguarding the company from awarding ownership to short-term contributors while rewarding those who stay and add real value.
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