Four-Year Vesting

Four-year vesting with a one-year cliff is the default. You must stay a year to get anything; then you get 25% vested. Stay three more years and the remaining 75% vests in equal monthly tranches. It’s arbitrary, but it’s what every tech company uses, so it became law.

Why four years became the standard

Venture capital standardized four-year vesting in the 1990s. Earlier, vesting schedules were idiosyncratic—some companies used five years, others two years, some had no cliff. Investors realized this chaos was costly: founders fighting over vesting terms in due diligence, hiring agreements getting negotiated on different timelines, equity records being messy.

A couple of large VC firms (Sequoia and Benchmark, primarily) began insisting on four-year vesting with a one-year cliff as a condition of investment. Within a few years, it became market standard. Today, if you’re negotiating equity at a venture-backed startup and you don’t have a specific reason to deviate, you’ll get 4-year/1-year-cliff.

The logic: one year is enough to determine if you’re actually going to contribute. Four years is long enough to make equity retention material (leaving at 2.5 years means you lose 62.5% of your grant).

The math: 4-year/1-year cliff

Your grant: 100 shares.

• Months 0–12: Nothing vests. You have 0 vested shares.
• Month 12 (cliff): 25 shares vest. You now own 25 shares.
• Month 13–48: 75 shares vest evenly over 36 months = 2.083 shares per month.
  • Month 24: 50 vested (25 + 25 months × 2.083).
  • Month 36: 75 vested (25 + 36 months × 2.083).
  • Month 48: 100 vested.

If you leave at month 13 (one day after the cliff), you walk away with 25 shares. If you leave at month 26, you walk with ~52 shares. If you stay the full four years, you get 100.

Variants you might encounter

No cliff: Some companies use straight-line vesting over four years (2.083 shares per month, starting immediately). This is rare and usually only for contractors or advisory roles. The one-year cliff creates urgency; without it, an employee who leaves at month 2 still gets 4% of their grant.

Longer cliff (18 months): Occasionally seen in senior hires or early-stage startups where founders want more certainty about retention. Less common now.

Shorter total period: Some private equity-backed companies or mature tech companies use 3-year vesting, especially for senior hires. Makes equity awards churn faster.

Tiered cliffs: Early hires sometimes get 6-month cliffs (25% at 6 months, rest over 3.5 years). Very negotiable; depends on how much the company values you.

Most employees never negotiate the four-year schedule; it’s locked in before offer letters are even drafted. But it’s negotiable for founders, senior executives, and anyone with leverage.

The psychological power of the cliff

The one-year cliff is brutally effective for retention. It creates a discontinuity: leave at month 11 and you get nothing. Leave at month 13 and you get 25%. This asymmetry keeps people going through the first year. Many companies extend the cliff implicitly—if you quit just after hitting the cliff, executives often ask you to stay longer, or offer refresh grants, because they’ve already “paid” for your first year.

The cliff also affects departure decisions in a surprising way: employees often stay past the cliff (even if they wanted to leave at month 10) just to ensure they get something vested. Some research suggests this costs companies millions in lost productivity—employees who are mentally gone but contractually bound, waiting for their cliff to hit.

Acceleration and the four-year schedule

Acceleration clauses override the four-year schedule. If 50% of your equity accelerates on a merger, your remaining 75% unvested shares (assuming you’re three years in) instantly become 37.5% vested. You don’t wait four years; the deal triggers early vesting.

Without acceleration, a merger acquisition can wipe out future compensation for departing employees. This is why negotiating acceleration is critical.

Private vs. public, and refreshes

At private startups, the four-year schedule matters obsessively, because you’ll probably leave before any liquidity event. Your vested shares are the only concrete thing you own (the unvested shares might never be worth anything if the company fails or is acqui-hired).

At public companies, four-year vesting still applies, but retention is less of an issue (you can sell vested shares on the open market). Many public companies also offer annual refresh grants, so a five-year tenure might include five separate grants, each vesting on its own four-year schedule.

International variations

Four-year vesting with a one-year cliff is a US startup norm. In some countries (UK, Germany, some Asian markets), vesting is less common—equity grants are less liquid and often structured as restricted stock with different tax treatment. Some jurisdictions have statutory minimums or maximums for vesting periods.

If working for an international company with a global equity plan, the vesting schedule might vary by country to comply with local law.

The enduring question: Why four years?

The short answer: because that’s what venture investors started requiring in the 1990s, and it stuck. There’s no magic to four years vs. five. Some argue four is short enough to be motivating, long enough to discourage turnover. Others point out that the average tenure at a tech company is 3–4 years anyway, so the schedule is academically pointless—most people never vest all their equity.

But conventions are powerful. If you deviate from four-year vesting, investors and candidates both raise eyebrows. It’s the Schelling point for equity compensation.