Refresher Grants: A Stage-by-Stage Founder Playbook

Equity refreshers are essential for retaining talent, but messy programs lead to massive, unexpected dilution. In Refresher Grants: A Founder’s Guide to Equity Retention we explored the "what" and "why" of refresher grants. This is the practical "how": a stage-by-stage guide to building your program, correctly sizing grants, and sidestepping the common mistakes that sink early-stage cap tables.

Seed to Series A: Why It Is Too Early for a Refresher Program

Do not introduce a systematic refresher program yet. Teams are small enough for individual conversations, most employees are still early in their vesting, and the dilution budget is limited. If a critical retention situation comes up, address it on an individual basis.

The mistake to avoid at this stage is over-promising. Promising employees refreshers without a board-approved plan sets expectations the company might not be able to fulfill. If the board later rejects the dilution or the strategy shifts, those unfulfilled promises become guaranteed retention failures and diminish employee trust.

Series A to Series B: Start With Promotion Refresher Grants

Once you have a defined leveling framework, the first refresher grants most commonly implemented are promotion grants. The formula to use as part of the award cycle is straightforward: the new-hire grant at the new level minus the new-hire grant at the previous level, both at the current valuation.

The promotion grant formula is always based on the current equity grid, not on what the employee already holds. For example, consider an employee who was hired at Level 3 and received 1,000 options at the time. Today, the equity grid shows 500 options for a Level 3 new hire and 800 options for a Level 4 new hire. If that employee is promoted to Level 4 today, the grant is 800 minus 500, which equals 300 options. The calculation uses today's benchmarks, regardless of what was granted at hire.

At this stage, a small employee performance grant pilot for the top 5% to 10% can be effective, but only if performance rating management is calibrated enough to identify that group credibly. The mistake to avoid is introducing individual performance grants before the company can credibly identify its top performers. If the rating process is not defensible, favoritism takes over, and the program loses credibility.

Series B to Series C: Add Individual Performance Refresher Grants

Once performance rating management is mature and calibrated, individual performance grants are awarded to the top 10% to 20% of employees annually. A tiered approach works well: 50% of the new-hire benchmark for the top 5%, and 25% for the next 10%, rather than a binary top-performer designation.

Three design decisions matter at this stage:

• Approval should go through a calibration committee, not rest with individual managers. Committee-reviewed nominations produce more defensible outcomes and reduce bias.
• Limit initial eligibility to the top 5% to 10% and expand only once the system proves it can differentiate credibly.
• Set clear rules for who qualifies for each grant type. Individual performance grants usually require at least six to twelve months of tenure, and promotion grants apply as soon as someone is promoted.

If more than ten employees are approaching the end of their initial vesting, consider tenure grants filtered for strong performers with at least two years at their current level. This is not yet a systematic program - it is a targeted response to emerging retention risk.

Key pitfalls at this stage include stretching individual performance grants to cover both retention and reward. If these grants are the only mechanism beyond new-hire grants, managers will push to include solid but not exceptional employees until the program loses its meaning. That is a signal the company needs a separate mechanism, such as tenure grants.

Separately, private companies without an IPO on the horizon should avoid benchmarking against public-company refresh programs. Combining generous private new-hire grants with public-style refreshers leads to double generosity and excessive dilution.

Series C, Series D, and Beyond: Implementing All Three Refresher Grant Types

The tenure program becomes systematic when enough employees reach the end of their vesting each year. A practical trigger: ask how many employees will reach 75% vested in the next 12 months. Fewer than five means you can still handle cases individually. Fifteen or more means it is time to formalize.

Tenure grants are typically sized at 25% to 100% of what a new hire at the same level would receive, depending on the cadence of granting. If the grant is given once, a 100% grant with a four-year vest is common. If it is granted annually after the tenure threshold has been reached, 25% is a common starting point. Even for tenure grants, employees’ performance should be a factor. Employees in the bottom 10% to 15% would typically not be eligible.

At this stage, performance grants also become more sophisticated. Some companies tie vesting to specific milestones rather than time alone, and executive refreshers are often split between time-based and performance-based vesting, commonly at a two-thirds to one-third ratio or 50/50.

A critical pitfall at this stage is treating refreshers as entitlements. When employees qualify for multiple grant types in the same year, stacked awards can result in heavier vesting than anticipated - but a high performer who also reaches tenure is exactly the employee you want to keep incentivized.

Performance-Based Vesting: Approaches for Later-Stage Refresher Grants

As companies mature, some choose to tie refresher grant vesting to performance-based outcomes rather than time alone. Three approaches are most common, each with distinct advantages and trade-offs.

The first is an annual business plan approach. The board approves a 12-month plan with defined success criteria, and achievement of those criteria triggers vesting. The advantage is a natural 12-month retention floor that aligns with the board's planning cycle. The trade-off is that constructing accurate annual plans is inherently difficult, and the results often require board discretion to interpret. This can introduce ambiguity into what was meant to be an objective process.

The second is metric-based vesting without a fixed time constraint. The board defines one or more metrics, and vesting triggers when those metrics are achieved. The advantage is genuine long-term alignment that extends beyond a single fiscal year, with clearly defined success criteria. The trade-off is unpredictability. If milestones are achieved in three months rather than three years, the company faces rapid, concentrated dilution that is difficult to plan for.

The third is individual performance assessment, in which the board evaluates the founder or executive on a rating scale and high ratings trigger grant awards. The advantage is flexibility, particularly for companies that lack clear metrics or formalized plans, and the ability to account for qualitative factors that numbers alone cannot capture. The trade-off is subjectivity. Assessments can become contentious, they are rarely used by more sophisticated companies, and over time, they can strain the founder-board relationship.

Timing also matters, regardless of which approach a company selects. Immediate full vesting at achievement delivers a clear reward signal but creates dilution spikes that are difficult to absorb. A staged approach - where achievement triggers the start of a vesting schedule rather than full vesting - provides the same recognition while preserving a continued retention incentive.

How to Budget Refresher Grant Dilution Before You Commit

No refresher program should launch without modeling its dilution impact. Gross burn rate, meaning total new options granted divided by fully diluted shares outstanding, should target 2% to 5% for options-based programs. Track refresh cost as a percentage of total burn: at the early stage, refreshers represent 10% to 20% of total grants; at the growth stage, 30% to 50%; and at the late stage, 40% to 60%.

 Model forward before committing:

• Headcount growth and new-hire grants needed
• Annual promotions, typically 10% to 15% of employees
• Performance grant eligibility, typically 5% to 20%
• Employees reaching 75% vested grants
• Expected forfeitures, typically 5% to 15% of outstanding grants annually

Balancing Employee-Friendly and Employer-Friendly Refresher Grant Design

Refresher programs involve trade-offs. More employee-friendly choices include:

• Layered vesting
• Broader eligibility
• Earlier tenure triggers, such as year two rather than year three

More employer-friendly choices include:

• Boxcar vesting
• Performance-gated eligibility
• Later tenure triggers

The art is in the combination. Pair one or two levers from each side so the program is competitive without becoming unsustainable. A program with broad eligibility and lower grant amounts is reasonable. A program with layered vesting, broad eligibility, and market-level grants is likely more generous than intended. 

Conclusion: Match the Program to the Stage

The path is sequential. At Seed to Series A, start by securing initial grants. Add promotion grants once a leveling framework is in place. Layer in employee based performance grants at Series B to Series C, but only after the organization can credibly identify its top 10% to 20%. And formalize tenure grants at Series C and beyond, once enough employees are approaching full vest that the problem becomes systematic rather than occasional.

At every stage, the discipline is the same: model the dilution before committing, set clear eligibility rules, and do not add the next layer until the organization is ready for it. The companies that get refresher programs right are not the ones that move fastest - they are the ones that add each piece at the right time.

For more resources for private companies, check out the Private Company Stock Plans section on NASPP.com