Vesting, Cliff, and Acceleration: What Your Grant Agreement Actually Says

What is vesting?

Vesting is the process by which you earn your equity over time. You don't own your equity outright when you get it - you earn it gradually according to a vesting schedule.

The standard startup vesting schedule is 4 years with a 1-year cliff. This means you earn 25% of your equity after 1 year, and then the remaining 75% vests evenly over the next 3 years (roughly 2% per month).

The purpose is retention. By tying equity to time, companies make sure employees stay around. If you leave after 6 months, you get nothing. If you leave after 18 months, you keep the 25% that vested.

The cliff

The cliff is the most important part of your vesting schedule. It's the minimum time you have to stay before you get any equity at all.

With a 1-year cliff, if you leave after 11 months, you get zero. If you leave after 13 months, you get the full first year's worth (25% with a 4-year schedule).

This is why the 90-day exercise window matters so much. If you leave before your cliff, your options disappear and you have 90 days to exercise them (and you won't because you got zero). If you leave after your cliff but before fully vesting, you can exercise whatever vested.

Vesting schedules: the standard and the exceptions

The standard: 4-year vest, 1-year cliff. Most tech companies use this. You get 25% after year 1, then 2.08% per month for 36 months.

Variations you might see:

3-year vest, 1-year cliff - some companies vest faster. You'd get 33% per year.

4-year vest, no cliff - some companies (especially later-stage) have no cliff. You vest monthly from day 1. This is rarer and usually a sign the company is more established.

2-year vest with 6-month cliff - some (usually very early stage or seed funded) vest over 2 years instead of 4.

Ask during offer negotiation what the schedule is. It matters. A 3-year vest means you're fully vested 12 months earlier than a 4-year vest, which changes your upside profile.

Acceleration clauses

Acceleration is a feature that speeds up your vesting in specific situations. There are two kinds:

Single-trigger acceleration: If something happens (usually the founder leaving, the company reaching a milestone, or the company going public), all your remaining unvested equity vests immediately.

Double-trigger acceleration: If two things happen (usually, the company is acquired AND you are fired or forced to quit), your unvested equity vests. This is the most common type in acquisition scenarios.

Double-trigger is standard in most acquisition clauses. It's there to protect you - if the acquiring company fires you after a deal, you at least get the equity you would have earned. Single-trigger is less common and usually happens only for specific events like an IPO or founder departure.

Check your grant agreement to see what acceleration clauses you have. Some accelerate all unvested equity, some accelerate only a percentage. Some have no acceleration at all.

What happens when you leave

Here's the practical scenario: you've been at the company 2.5 years, and you've vested 62.5% of your equity (1 year cliff = 25%, plus 1.5 years of additional vesting = 37.5%). You decide to leave.

What happens to your vested equity? It's yours. You own it. The company can't take it back. If you have options, you have 90 days to exercise them. If you have common stock, you own it outright.

What happens to your unvested equity? It's forfeited. You lose the remaining 37.5%. This is the standard at most companies, and it's in your equity agreement.

Special case: change of control. If the company is acquired, many equity agreements have double-trigger acceleration. If you're terminated as part of the acquisition, your remaining equity vests. If you're not terminated, it usually vests according to the original schedule (unless the acquiring company agrees to accelerate it).

The most important questions to ask

1. What's my vesting schedule? Get the exact numbers. 4-year/1-year cliff is standard, but ask.

2. Do I have acceleration clauses? Single or double trigger? What events trigger them?

3. What happens if I'm acquired? Is there double-trigger acceleration? Do options get converted to the acquirer's equity, or do I get cash?

4. Can I exercise after I leave? Confirm the 90-day window. Some companies are more generous, especially for key employees.

5. What happens to unvested equity in a down round? Does the company adjust vesting schedules? Some do, some don't.

Reading your actual grant agreement

Your grant agreement (also called an equity offer letter or grant notice) is a legal document. It will have sections on:

• Number of shares or options granted
• Type of equity (ISO, NSO, RSU, common)
• Vesting schedule (cliff and remainder)
• Exercise price (for options)
• Acceleration clauses
• What happens if you leave
• Tax implications (very brief)

Read the vesting schedule section carefully. It will say something like "25% vests on the 1st anniversary of the vesting start date, and 1/48th of the remaining shares vest monthly thereafter." This is the 4-year/1-year cliff.

If you don't understand something, ask your HR or finance team. They should explain your equity clearly.