An equity refresh grant is additional equity you give an employee after their original grant, usually issued once 40 to 60 percent of that original grant has vested and the retention value of the unvested shares starts running low. Most founders wait too long. By the time an early engineer's four year vest is two years in, they can already see the finish line, and the shares still ahead of them stop feeling like an incentive.
The right trigger is not a calendar date. It is the moment an employee's unvested balance stops outweighing what a competitor would pay to poach them. Miss it in either direction and you either burn dilution refreshing someone who was never a flight risk, or you lose a critical early hire six months before their cliff to someone else's signing bonus.
What an equity refresh grant actually is
An equity refresh grant is a second or third stock option or RSU award issued to an employee who already holds equity from their hiring offer. It sits on top of the original grant rather than replacing it, and it typically starts its own four year vesting clock from the date it is issued.
Carta's compensation benchmarking shows more than half of employees at venture-backed companies receive a refresh by their second year on the job, most commonly sized at 25 to 50 percent of what a new hire in the same role would get today. That range matters because it tells you a refresh is not meant to match the original grant. It is meant to restore enough forward-looking equity that the employee still has a reason to stay.
Why founders wait too long
The most common mistake is treating equity as a one-time hiring cost instead of an ongoing retention lever. Founders budget for the offer letter grant, then forget equity exists until someone resigns. By then it is a counteroffer, not a refresh, and counteroffers cost more because they are negotiated from a position of weakness.
Industry survey data on vesting anxiety backs this up: employees with 40 to 60 percent of their initial grant already vested show measurably higher flight risk, because the remaining unvested shares no longer feel large enough to offset the opportunity cost of staying. That window, not year four, is when a refresh actually changes behavior.
The four triggers that mean it's time for a refresh
Four situations reliably signal that a refresh grant is due, and none of them are simply an anniversary on the calendar.
- Vesting cliff proximity: the employee has crossed roughly half their original vest and the remaining unvested value is small relative to their current market rate.
- Promotion: the employee's scope has expanded into a role the company would now hire externally at a higher equity band. This is the easiest trigger to defend to a board because the justification is the new title, not loyalty.
- Valuation jump: a new funding round reprices the company, and the original grant's value on paper no longer reflects the risk the employee took on when they joined pre-round.
- Named flight risk: you have specific evidence, a recruiter reach-out the employee mentioned, a competing offer, a change in personal circumstances, that this person is actively evaluating leaving.
How much to grant
Refresh size should scale with tenure and trigger type, not be a flat percentage applied company-wide. A rough founder-usable table:
Year 2 retention refresh: 25 to 30 percent of the original new-hire grant size.
Promotion refresh: sized to close the gap between the employee's current equity band and the band of the new role, not a fixed percentage.
Named flight risk refresh: 40 to 50 percent, large enough to be felt immediately, reserved for genuine retention emergencies rather than routine cycles.
Grant size that is too small does not move retention behavior at all. It just spends dilution for no behavioral effect, which is worse than granting nothing.
What this actually costs your cap table
Refresh grants for early employees typically pull from your existing option pool, not a new authorization, which is exactly why option pool sizing at your last round matters more than most founders realize when they are negotiating it. A pool sized only for new hires and not for refreshes runs out mid-cycle, forcing an awkward pool top-up negotiation with your board right when you need to move fast on retention.
A useful gut check before you set a refresh policy: model what your fully diluted cap table looks like if every employee past year two gets a 30 percent refresh annually. For a 15-person team at seed stage, that is usually one to two additional points of dilution per year, which is manageable if it is planned for and painful if it is a surprise.
The first move to make this week
Pull a list of every employee who is past the 18-month mark and calculate what percentage of their original grant has vested. Anyone above 40 percent vested goes on a review list for your next board meeting, not because they are all leaving, but because you want to make the refresh decision on your timeline instead of theirs.
Frequently asked questions
When should a startup start giving equity refresh grants?
Most companies start once an employee's original grant is 40 to 60 percent vested, which usually lands around year two of a standard four year vest. Earlier-stage companies sometimes wait until Series A or B once they have a formal leveling framework to size refreshes against.
How big should an equity refresh grant be?
Typically 25 to 50 percent of what a new hire in that same role would receive today, adjusted up for promotions and genuine flight-risk situations, and down for routine annual cycles.
Do equity refresh grants come from a new option pool?
Usually not. They are drawn from your existing option pool, which is why pool sizing at your last fundraise needs to account for refreshes, not just new hires.
Does an equity refresh grant get a new vesting schedule?
Yes. A refresh grant almost always starts its own new four year vesting schedule from the grant date, separate from and layered on top of the original grant's remaining vest.
What happens if you never give a refresh grant?
Nothing happens until it does. Retention risk rises quietly as unvested equity shrinks, then shows up all at once as a resignation you did not see coming, usually from the employee whose institutional knowledge you can least afford to lose.
A refresh policy does not need to be complicated. It needs a trigger you check on a schedule, a sizing range you apply consistently, and a pool that was built large enough to fund it. Set those three things once and you stop making retention decisions in a panic.