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“Cliff” is used to describe when you don’t get your RSUs topped off as you work for the company and your stock runs out, causing your comp to go down (“off the cliff”)
When they vest, if you sell, you’ll be hit with shirt-term capital gains on the difference between the grant price and sale price. If you sell immediately, the difference will just be a few dollars.
If you hold for a year, you get long term capital gains, again on just the difference between sale price and grant price.
2020: You’re given $100k stock with 1 year vesting period
2021: $100k + appreciation is now vested and it’s your money
- $100k+ is now part of your total gross income and you pay income taxes accordingly
- If you sell the stocks in 2021: you will also pay short term cap gains on the appreciation $
- If you sell in 2022: you will pay long term cap gains on the appreciation $
OP- you are confusing a couple concepts.
Funding rounds are dictated by a startup’s need for cash. Depending on the percentage of the company sold, there is a valuation. For example, a startup wants $1M, so they sell off 1% of the company for this amount. Valuation is therefore $100M.
RSUs for a pre-IPO startup only have value once the company goes public. You generally cannot sell them back even if they are vested. The implied value of those RSU depends on the valuation- which is loosely correlated to the last funding round.
Hope this helps