A cliff is the initial stretch of a vesting schedule during which no equity vests at all. When the employee reaches the cliff date — most commonly one year — a first block of equity vests in a single step, after which the rest vests gradually (monthly or quarterly). An employee who leaves before the cliff walks away with nothing.
Why it matters to you
The cliff explains why early-stage employees who departed within their first year hold no shares to sell, while those who crossed the one-year mark do. When evaluating unlisted shares sourced from employees, the cliff is part of confirming that the equity genuinely vested before it was transferred.
Example: An employee left after 11 months — one month short of the cliff — and forfeited their entire grant, having earned no transferable shares.