Minimum service threshold for equity ownership
The cliff is a threshold built into a vesting timeline. Until the holder reaches it, typically 12 months of continuous service under the vesting schedule, no equity vests at all, even though the grant was made on day one. If the holder leaves in month 11, they leave with nothing from that grant. If they reach month 12, a lump sum vests immediately, usually 25% for a standard four year schedule, and the rest continues vesting monthly.
Matching cliff length to probation periods
A one year cliff filters out hires that do not work out quickly, without the company needing to negotiate a buyback or clawback for a short tenure. It also matches typical probation and onboarding periods, since it usually takes close to a year to judge whether a hire or a founder relationship is working, which is part of why 4 year vesting remains the default term.
Some jurisdictions have separate statutory probation periods for employment purposes. A vesting cliff is a separate, contractual mechanism set by the option or share plan, not an employment law requirement, and leaver outcomes are instead governed by good leaver / bad leaver provisions.
Cliff exceptions for senior hires and founders
- Refresher grants to existing employees sometimes skip the cliff, since the person has already proven themselves.
- Founders occasionally negotiate credit for time already worked pre-incorporation against the cliff, though this is not universal.
- Some companies use a shorter cliff, such as 3 or 6 months, for very senior or hard-to-hire roles, trading retention protection for competitiveness.
Questions people ask about cliffs
- Is a vesting cliff negotiable?
- Yes, especially for senior hires or founders with strong negotiating leverage, though 12 months remains the market default in most of Europe.
- What happens exactly on the day the cliff is reached?
- The portion of the schedule that would have vested monthly or quarterly up to that point vests as a lump sum, commonly 25% for a four year schedule.
- Can a company waive the cliff for a leaver?
- Boards sometimes agree to waive or partially waive the cliff on a case by case basis, but this is a discretionary exception, not a right.
General information for founders, not legal or tax advice. Thresholds and rates change, so confirm the current position with an adviser in the relevant country before granting.