Refresher Grants
Additional stock option or equity grants awarded to existing employees after their initial hire grant, typically given annually or at promotion milestones to maintain retention incentives and offset dilution.
What Are Refresher Grants?
Refresher grants (also called refresh grants, top-up grants, or retention grants) are new stock option or equity awards given to current employees after their initial hire grant. As an employee's initial grant vests over its standard four-year schedule, the company issues additional grants to ensure the employee continues to have meaningful unvested equity — which serves as a retention incentive. Refresher grants are a standard practice at well-run startups and public tech companies, though the size, frequency, and timing vary significantly by company.
How Refresher Grants Work
Timing and Frequency
Most companies issue refresher grants on an annual cycle, typically coinciding with performance reviews. Some companies grant refreshers at promotion milestones or upon completion of specific retention periods. The timing may also be influenced by the option pool's availability and the company's compensation philosophy.
Grant Size
Refresher grant sizes are usually smaller than the initial hire grant. A common pattern is for annual refreshers to be 25–50% of the initial grant, though this varies widely. At public companies, the grant size is often determined by a target total compensation level, with the equity component sized to bring the employee to that target given current stock prices.
New Vesting Schedule
Each refresher grant has its own vesting schedule, typically a new four-year vest with a one-year cliff (though some companies use three-year schedules or no cliff for refreshers). This means you may have multiple grants vesting on overlapping schedules. Track each grant separately — they have different grant dates, strike prices, and vesting timelines.
Strike Price at Current 409A
At private companies, each refresher grant's strike price is set at the current 409A valuation on the grant date. If the company has grown since your initial hire, your refresher grants will have a higher strike price than your original grant. This means the cost to exercise refresher grants is higher, and the potential upside (spread at exercise) starts from a higher baseline.
Practical Implications for Startup Employees
The Rising Strike Price Problem
If you joined early at a low 409A valuation, your initial grant has a low strike price. As the company grows and raises funding, 409A valuations increase, and each subsequent refresher grant has a progressively higher strike price. This means later grants are more expensive to exercise and have a smaller spread relative to the current value.
Refreshers as a Retention Signal
Companies that provide regular, meaningful refresher grants demonstrate a commitment to retaining employees through equity incentives. The absence of a refresher grant program — or grants that are significantly below market — can signal that the company does not prioritize long-term employee retention through equity.
Tax Planning Across Multiple Grants
With multiple grants at different strike prices and grant dates, tax planning becomes more complex. Each grant has its own AMT calculation (for ISOs), its own holding period clocks for qualifying dispositions, and its own cost basis. Exercise the lowest-strike-price grants first to maximize the spread potential and minimize cash outlay.
Dilution Offset
Refresher grants partially offset the dilution that employees experience when the company raises new funding rounds. While your existing shares represent a smaller percentage of the company after each round, refresher grants add to your total share count and help maintain your economic participation.
How It Relates to Exercising Stock Options
Refresher grants create a portfolio of options at different strike prices. When planning your exercise strategy, evaluate each grant independently: its strike price, vesting status, ISO vs. NSO classification, and holding period implications. Prioritize exercising lower-strike-price grants first (lower cash cost, larger potential spread). Track the ISO $100,000 annual limit across all grants to understand which tranches are treated as ISOs versus NSOs. If you are leaving the company, review the post-termination exercise window for each grant — they may have different expiration dates.