Understanding vesting and cliffs
Vesting is how you earn your equity over time. The most common startup schedule is four years with a one-year cliff: nothing vests in your first year, 25% vests on your first anniversary, and the rest vests monthly over the next three years. What you keep if you leave depends on what has vested and, for stock options, whether you buy them in time.
The standard schedule
Most startup grants vest over four years with a one-year cliff, then monthly. Take a grant of 48,000 options:
- Months 1–11: nothing has vested. Leave now and you keep none of it.
- Month 12, the cliff: 12,000 options (25%) vest at once.
- Months 13–48: 1,000 more vest each month.
- Month 48: all 48,000 have vested.
Your grant may differ. Some vest quarterly, some have no cliff, and some put more of the grant in later years. The grant agreement is the source of truth, not the offer summary. The Vesting Planner maps your own dates.
What the cliff does
The cliff protects the company if a hire doesn’t work out. For you, the first year is all or nothing: leave or get let go in month 11 and you usually keep no equity, unless your agreement says otherwise. If that risk matters to you, ask before signing whether the company would vest a pro-rata share for a termination without cause. It isn’t standard, but it costs nothing to ask.
A later grant, such as a promotion or refresh grant, usually runs on its own schedule and may carry its own cliff.
When vesting starts
Vesting runs from the vesting commencement date, which is usually your start date even if the board approves your grant weeks later. Check the date on your grant agreement. A commencement date later than your start date quietly delays every milestone.
What happens when you leave
- Unvested equity goes back to the company.
- Vested options must be bought (exercised) within the post-termination exercise window set in your option agreement. Ninety days is common; some companies allow longer. Options you don’t exercise in time expire.
- Incentive stock options (ISOs) keep their tax treatment only if you exercise within three months of leaving, or one year if you leave because of disability. After that they are taxed as non-qualified options, even if the company gives you longer to exercise.
- Shares you already own stay yours, though the company may have a right of first refusal if you later sell them.
Exercising costs money: the strike price times the number of shares, and sometimes tax. Work out the cost before you resign, not after.
Acceleration
Acceleration vests some or all of your unvested equity early when something specific happens.
- Single-trigger: vesting speeds up on one event, usually the company being acquired.
- Double-trigger: vesting speeds up only if the company is acquired and you lose your job, or your role is cut back, within a set period.
Acceleration is offered mostly to executives and senior hires, and occasionally to early hires. If you are joining very early, it’s reasonable to ask for double-trigger acceleration. See vesting acceleration.
Refresh grants
Your first grant finishes vesting in year four. After that, your equity only grows if the company gives you new grants. Ask whether the company has a refresh policy, when grants are usually considered, and whether they vest on the same schedule.
Early exercise and the 83(b) election
Some companies let you early-exercise: buy your shares before they vest. Unvested shares stay on the schedule, and the company can usually buy them back at the price you paid if you leave.
If you early-exercise, you can file an 83(b) election within 30 days of buying the shares. It lets you be taxed on the spread at purchase, which is often zero when the strike price equals fair market value, instead of as each batch vests. The 30 days are strict, with no extensions. You can mail the election or submit IRS Form 15620 online through an IRS Online Account, and you give your company a copy.
An 83(b) doesn’t apply to a standard option you exercise after it vests: there is nothing to file. It applies to restricted stock and early-exercised shares (IRS Publication 525).
Early exercise also starts your holding period sooner. That matters for long-term capital gains and, if the company qualifies, for the qualified small business stock (QSBS) exclusion, which for stock issued after July 4, 2025 can exclude part of the gain after three years and all of it after five, up to set limits. The trade-off: you pay cash for shares that may never be worth anything. This guide is educational, not tax advice. Talk to a tax adviser before you exercise.
Check your offer
- How long is the vesting schedule, how long is the cliff, and does vesting happen monthly or quarterly?
- What is the vesting commencement date?
- How long is the exercise window after you leave?
- Can you early-exercise?
- Is there any acceleration, and is it single- or double-trigger?
- Is there a refresh grant policy?
The equity offer questions list has the full set of questions to send.
Frequently asked questions
What happens to unvested equity if I’m laid off?
It usually goes back to the company. Unless your agreement says otherwise, being laid off before the cliff means keeping no equity, and after the cliff you keep only what has vested. Check whether your agreement includes acceleration or pro-rata vesting for a termination without cause.
Does the cliff restart if I get a new grant?
Your original grant keeps vesting on its own schedule. A new grant, such as a promotion or refresh grant, usually has its own vesting schedule and may have its own cliff.
Do I need to file an 83(b) election for my stock options?
Only if you early-exercise unvested options or receive restricted stock. Then you have 30 days from the day you get the shares. For a standard option that you exercise after it vests, there is nothing to file.
How long do I have to exercise my options after leaving?
Your option agreement sets the window, and 90 days is common. ISOs keep their tax treatment only if you exercise within three months of leaving; after that they are taxed as non-qualified options.