It makes sense when there's real equity being disbursed. One person has $500,000. The other has sweat equity. How do you calculate the relative value of the latter? Come up with a fair salary, and turn it into equity. Four years is a good starting estimate, but if the person leaves early, then the assumption on which the equity level was set is invalidated.
Being against the one-year cliff means you either (a) believe you will never make a hiring mistake or (b) believe that it doesn't matter who holds equity in your company. Both are dangerous assumptions.
Not having a cliff doesn't even help employees. It creates a culture where new hires need to be on the defensive from the moment they're hired, because management is strongly incentivized to release new hires as soon as they can to contain the damage of bad hires. In cliff vesting companies, management has a full year to figure out whether someone's going to work out, which is good, because most equity-compensated jobs have ramp-up periods.
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It makes sense when there's real equity being disbursed. One person has $500,000. The other has sweat equity. How do you calculate the relative value of the latter? Come up with a fair salary, and turn it into equity. Four years is a good starting estimate, but if the person leaves early, then the assumption on which the equity level was set is invalidated.
I'm against cliffs, though.
Being against the one-year cliff means you either (a) believe you will never make a hiring mistake or (b) believe that it doesn't matter who holds equity in your company. Both are dangerous assumptions.
Not having a cliff doesn't even help employees. It creates a culture where new hires need to be on the defensive from the moment they're hired, because management is strongly incentivized to release new hires as soon as they can to contain the damage of bad hires. In cliff vesting companies, management has a full year to figure out whether someone's going to work out, which is good, because most equity-compensated jobs have ramp-up periods.