Equity Refresh Grant

A refresh grant is how companies keep employees happy after year one. You got 10,000 shares when hired; two years in, they offer 5,000 new shares to remind you that they value you. Without refreshes, most of your equity is locked up in a four-year schedule, and tenure isn’t rewarded with new opportunity.

Why refresh grants exist

At many growth companies, you’re granted 10,000 options on your first day. Four years later, all 10,000 are vested. You’ve earned the equity; it’s yours. But now there’s no vesting cliff pulling you forward. You can leave tomorrow and take 100% of your equity with you.

To counter this, companies issue annual or biannual refresh grants—a new batch of shares, with a new vesting schedule. The terms are reset, creating a fresh cliff and a new reason to stay.

A typical pattern: Employee hired with 10,000 options vesting over four years. After two years (50% vested, 5,000 vested, 5,000 unvested), the company offers a refresh grant of 4,000 new options, also vesting over four years. Now the employee has 5,000 vested shares plus 9,000 unvested shares (5,000 old + 4,000 new). The combined unvested equity resets the incentive to stay.

Size and frequency

Refresh grants vary by company stage and competitiveness:

High-growth / high-attrition companies (tech, venture-backed): Refresh grants annually, typically 15–40% of the initial grant. An engineer hired with 10,000 options might get 2,000–4,000 in year two, another 2,000–4,000 in year three, and so on.

Stable public companies: Refresh grants more conservatively—every two years, or 10–15% of original grant. The goal is gentle retention, not aggressive churn management.

Early-stage startups: Often no refresh grants until Series A or later. Equity pools are small; companies conserve shares for new hires and don’t refresh existing staff until funded.

The size depends on performance, tenure, and whether you’ve been promoted. A high-performer or someone promoted to manager gets a larger refresh. Someone on a performance improvement plan might get none.

Vesting on refresh grants

Most refresh grants use the same vesting schedule as initial grants (four-year schedule, often with a one-year cliff, though some companies use straight-line vesting on refreshes to simplify administration).

However, some companies offer “accelerated vesting” on refreshes—perhaps a two-year schedule with no cliff. The theory is that you’ve already proven your value; the refresh is meant to keep you, not test you. In practice, two-year refreshes are generous and less common.

Tax treatment

A refresh grant is issued at the current grant date price (i.e., the stock price on the day of grant). For a restricted stock unit refresh, you owe ordinary income tax on the vesting value at the time of vesting, just as with the initial grant.

For option refreshes, the exercise price is the stock price on the refresh date. If the company’s valuation has increased since your original grant, your refresh options might have a much higher strike than your original grant. This is fine (the company is worth more) but means you need more stock appreciation to make the new options valuable.

Example: Initial grant at $10 strike, company now valued at $50 per share. Refresh grant at $50 strike. You need the stock to appreciate to $60+ to make the new options valuable. The initial grant, by contrast, is profitable at $11 and above. Early grants are structurally more valuable because they have lower strikes.

Refresh grants and the equity ladder

Over a 10-year tenure at a growth company, you might accumulate 4–5 separate grants:

1. Year 0 (hire): 10,000 options at $10 strike, four-year vest.
2. Year 2 (refresh): 3,000 options at $30 strike, four-year vest.
3. Year 3 (promotion): 2,000 options at $50 strike, four-year vest.
4. Year 5 (refresh): 2,000 options at $70 strike, four-year vest.
5. Year 7 (refresh): 2,000 options at $90 strike, four-year vest.

Your vested equity is a mosaic of different strikes. At exit, you exercise all of them, but the first grant is the most valuable because of its low strike. Later grants are less valuable for pure upside but provide additional retention incentive and signal that the company values you.

Refresh grants and equity budgeting

From the company’s perspective, refresh grants are expensive. If a company has 100 employees and issues 10,000-share refreshes to half of them annually, that’s 500,000 shares per year being newly vested. Over a decade, that’s 5M shares. For a 100M-share company, that’s 5% annual dilution just from refreshes.

Early-stage companies can’t afford this. Only well-funded or public companies with large equity pools can do aggressive refreshes. This is why early-stage startups offer large initial grants but few refreshes.

Negotiating refresh grants

Your initial grant is negotiated before hire. Your refreshes are typically discretionary—the company decides whether to give them, based on:

• Performance reviews
• Tenure
• Market competition for your role
• Overall company financial health

You can negotiate refresh grants by:

1. In a promotion: “As part of this promotion, I’d expect a refresh grant of X shares.”
2. During annual review: “I’ve been here four years; my initial grant is mostly vested. What does the equity refresh plan look like for this year?”
3. When considering external offers: “I have an offer that includes $X in annual equity refreshes. What can you offer?” (Credible only if you actually have an offer.)

Managers sometimes have wiggle room (their budget allows a 3,000-share refresh instead of 2,000) but can’t unilaterally create refreshes. It’s typically an HR/Finance decision tied to an equity pool.

Refresh grants and equity pools

Companies manage equity pools—the total shares reserved for future grants. When a company goes public or is acquired, the equity pool has implications for post-deal equity percentages. Employees with larger pools (many refreshes over tenure) might have higher percentages at exit. This creates another retention dynamic: the longer you stay and accumulate refreshes, the larger your exit ownership percentage.