A cliff period is the initial phase in a stock option or equity vesting schedule during which an employee or founder does not accumulate any ownership rights. Typically lasting one year, this period requires the individual to remain with the startup for a set time before any shares or options vest.
Why is a cliff period important in vesting schedules?
A cliff period protects startups by ensuring that team members demonstrate commitment before earning any equity. If a team member leaves before the cliff ends, they forfeit their shares, helping secure stability.
How does a cliff period benefit founders and employees?
For founders and employees, a cliff period builds trust with investors by showing they’re committed to the company. After the cliff ends, equity vests according to the remaining schedule, rewarding long-term contributions.
What is the typical length of a cliff period?
Cliff periods generally last one year, though this can vary. After the cliff, equity vests gradually according to the agreed vesting schedule.
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