Fundraising
Cliff
Quick definition
The initial waiting period (typically 1 year) before any portion of a vesting grant becomes earned.
A cliff means an employee/founder must stay at least one year before any equity vests. On day 365, 25% of the grant vests in a single lump. Before that, leaving forfeits the entire grant. The cliff protects companies from quick exits walking away with equity. Investors require cliffs on all employee equity grants and on founder reverse-vesting schedules.
Related fundraising terms
SAFE (Simple Agreement for Future Equity)
Convertible instrument commonly used for early-stage rounds.
409A Valuation
Independent valuation of common stock used to set option strike prices.
Cap Table
A record of all ownership interests in your company.
Pro Rata Right
An investor's right to maintain their ownership % in future rounds.
Frequently asked questions
- What is Cliff?
- A cliff means an employee/founder must stay at least one year before any equity vests. On day 365, 25% of the grant vests in a single lump. Before that, leaving forfeits the entire grant. The cliff protects companies from quick exits walking away with equity. Investors require cliffs on all employee equity grants and on founder reverse-vesting schedules.
- Why is Cliff important for startups?
- Cliff is a fundraising concept that matters for startup founders because it directly affects fundraising readiness, financial decision-making, or operational discipline at the stage where mistakes are expensive to undo. Founders who understand it have a meaningfully easier time in diligence, board meetings, and investor conversations.
- What category does Cliff belong to?
- Cliff is a Fundraising term in the StartupCFO finance glossary — alongside other fundraising concepts that founders, CFOs, and accountants use in daily startup operations and reporting.
- Where can I learn more about Cliff?
- Beyond this definition, see the related fundraising terms below, or explore StartupCFO's insights and tools that put Cliff in context. For specific situations, talk to a fractional CFO who can walk through your numbers.
Got a finance question that needs more than a definition?
Talk to a real CFO. 30 minutes, no contract, free.
