Equity Refresh Grants: Timing, Sizing, and Retention Impact

Early hires' equity vests over 4 years — then what? Refresh grants keep top talent aligned for the long haul. Here's when to give.

Equity Refresh Grants: When to Give Them and How Much

Employees who joined at year 1 finish vesting at year 4 or 5 and start looking. If you want them for the next 4 years, you need refresh grants — additional equity grants that re-establish alignment. Done well, refreshes retain top talent through IPO. Done badly (too small, too late, or perceived as unfair) they cause the departures they were meant to prevent.

When to give refreshes

Two triggers. (1) Year 2.5-3 of tenure — proactive refresh at 50-75% of original grant, timed before the vesting cliff creates flight risk. (2) Performance moment — promotion, expanded scope, or retention need. Waiting until year 4+ is too late for top performers who are already fielding recruiter calls. Best-in-class companies grant refreshes annually starting year 2, in smaller amounts.

How much to grant

Standard refresh: 25-50% of the equivalent new-hire grant for the current level. Example: if a Staff Engineer joining today would get $400K in options, a refresh for a Staff Engineer at year 3 would be $100-200K in options. Vesting: 4-year with no cliff (they've earned trust) or 3-year vesting for faster impact. Adjust up for critical retention, down for merely satisfactory performance.

Communicating refreshes

Manager delivers in a private conversation, framed as recognition and long-term commitment — not as a counter to a competing offer. Include the reasoning ('you've delivered X, we're investing in you for the next 4 years'). Follow up with paperwork within a week. Avoid: batch delivery in an email, framing as automatic, or delivering only when someone threatens to leave. The framing determines whether refreshes feel like recognition or hush money.

Common mistakes

Refreshes only for people who threaten to leave (rewards resignation threats). Refreshes uniform across performance levels (destroys the signal). Refreshes at 10-15% of new hire grants (too small to matter). No refreshes at all until year 4+ (too late — they've already interviewed). Refresh cadence that's opaque to employees (creates paranoia about who got what). Publish the framework internally: 'Level X gets a refresh evaluation every 24 months, size based on performance.'

Frequently asked questions

Should we do 409A adjustments to reprice underwater options?
In a down round or extended flat period, yes — but this is a formal 409A repricing that requires board approval and creates tax complications for holders. Get counsel involved and communicate carefully. Alternative: leave old options, grant new options at the current lower 409A strike price (simpler, avoids repricing complications).
How do refreshes work with founders?
Founder refreshes are unusual until Series C+, and only after substantial dilution has reduced founder ownership below 15-20% combined. Even then they require board approval and typically face investor pushback. Handle carefully and only with real justification.
Do refresh grants dilute existing employees?
They come out of the option pool, which was sized to cover refreshes. If the pool is being exhausted, the next round refreshes it and all existing holders (including recent refresh recipients) get diluted. That's the normal cycle.

Related fundraising guides (40)

Investor directory · Fundraising library · Articles A–Z · Company funding database