Grant Date
The date on which a company officially awards stock options to an employee, establishing the strike price, vesting schedule, and the start of key holding periods for tax purposes.
What Is a Grant Date?
The grant date is the official date on which your company awards you stock options. It is one of the most important dates in the lifecycle of your equity compensation because it establishes several critical parameters: the strike price (based on the fair market value on that date), the start of your vesting schedule, and the beginning of holding period clocks that affect your tax treatment when you eventually sell the shares.
Your stock option agreement will specify the grant date, the number of options granted, the exercise price, and the vesting schedule. While you may have verbally received an offer of equity earlier, the grant date is when the board of directors (or an authorized officer under a delegated authority) formally approves the grant.
How the Grant Date Works
Board Approval
Stock option grants require approval by the company's board of directors or a compensation committee. The grant date is typically the date of the board meeting at which the options are approved — not the date the offer letter was signed, the employee's start date, or the date the employee was notified. In some cases, there can be a meaningful delay between when an employee joins and when the board formally approves their option grant.
409A Valuation and the Grant Date
The exercise price of your options must be set at or above the fair market value of the company's common stock on the grant date. This fair market value is determined by the most recent 409A valuation. Companies typically obtain a new 409A valuation every 12 months or after a material event (such as a funding round). If your grant date falls after a funding round that increased the 409A valuation, your strike price will reflect the higher valuation.
Timing Matters
The timing of your grant date can significantly affect your strike price. If you join a company just before a funding round closes, the board may approve your grant at the pre-round 409A valuation, giving you a lower strike price. If the board delays approval until after the round closes, a new 409A valuation may be required, resulting in a higher strike price. This is one reason employees sometimes negotiate for their option grants to be approved at a specific board meeting.
Practical Implications for Startup Employees
The Gap Between Start Date and Grant Date
It is common for there to be a gap of weeks or even months between your start date and your grant date. However, most companies backdate the start of vesting to your employment start date, even if the formal grant comes later. This means you do not lose vesting time. Verify this in your option agreement — the vesting commencement date and the grant date may be different.
ISO Holding Period Clock
For incentive stock options, the grant date starts one of two holding period clocks. To achieve a qualifying disposition (taxed at long-term capital gains rates), you must hold the shares for at least two years after the grant date and one year after the exercise date. The grant date clock is the longer of the two, so it effectively sets the earliest possible date for a qualifying sale.
Multiple Grant Dates
As you continue working at a company, you may receive additional option grants — often called refresher grants. Each grant has its own grant date, strike price, and vesting schedule. It is important to track each grant separately for tax planning purposes because each has different holding period requirements and may have different strike prices based on the 409A valuation at the time.
Late Grants and Missing Paperwork
Some early-stage companies are slow to formalize equity grants, especially at the seed stage. If you have been promised options but have not received a formal stock option agreement, follow up. The grant is not official until it has been approved by the board and documented in an option agreement. Verbal promises of equity are not enforceable in most jurisdictions.
How It Relates to Exercising Stock Options
Your grant date determines your strike price and starts your ISO qualifying disposition clock. When planning your exercise strategy, know the grant date for each option tranche — this tells you when a qualifying disposition becomes available and helps you calculate the minimum holding period required for favorable tax treatment. If you have options from multiple grants at different strike prices, you may want to exercise lower-strike-price grants first to minimize your upfront cash outlay.