Equity Refresh Grants: How to Structure, Model, and Vest Them

Key Takeaways

• Refresh grants typically run about 30% of a new-hire grant, per Carta data.
• About 20% of employees get a refresh by year one, and nearly 50% by year two.
• Common strategies: boxcar, traditional, performance, promotion-based, and annual grants.
• Dilution is simple to model: new refresh shares divided by new fully-diluted share count.
• There's no single right approach. It depends on your company's stage and processes.

Originally published August 20, 2021, and updated July 2026.

Long before catered lunches, embroidered Patagonias, and 99% covered healthcare premiums, stock options entered the scene.  

In fact, stock options for employees can be traced all the way back to the mid-1970s. Though you would never know it with how misunderstood they are. 

Why did companies start offering stock options to employees?

• Salaries were lower than big corporations: stock options provided a way to [sort-of] level the playing field and give employees a shot at that big exit
• Ownership aligns incentives: giving employees a stake in the success of the company would motivate them to work harder and see to its success

But how long would you have to burn the midnight oil before you might have a shot at that big pay-out?

Before the Dot-Com Boom, most startups would IPO in 6-8 years. A few names you may know were even quicker. 

Amazon: Raised an $8M total Series A in 1996
Founded: 1994, IPO: 1997 

Google: Raised $36.1M over 4 funding rounds
Founded: 1998, IPO: 2004

Salesforce: Raised $65.4M over 6 funding rounds
Founded 1999, IPO: 2004

You may also notice that the total amount of funding raised by these companies is nothing compared to today’s standards. Pave, for one, has already raised more venture money than Google did.

The 4-year vest, 1-year cliff was born

Translated: you must stay at least 1 year to play the game at all, and in order to have all your chips, you must stick it out for 4. 

With some of the IPOs we looked at above, this made quite a bit of sense. Stick around long enough to play the game, and you might be on the heels of the next IPO. 

Still today —by a long shot—this is usually what the fine print of your lotto ticket reads. And so, an employee signs on the dotted line for a chance at the next big startup.

But does this still make sense? 

In a look at the 16 SaaS IPOs of 2020, the median time from founding to IPO was 13 years. Yes, 13.  

Next Translation: The 4 year vest will not incentivize your employees to stick around for 13 years—or anywhere close. 

So how are companies keeping people around given the new circumstances?

Enter: Equity refresh grants

So assuming you want to keep your people around for more than 4 years, you may want to heavily consider additional equity grants.

Common Equity Refresh Grant Strategies

A few common strategies: 

• The boxcar grant: A new equity grant usually offered in year 2 or 3 of employment that won’t begin vesting until after the 4 year grant concludes. So, the vesting schedules look like boxcars - clever.
• Traditional grant: New grants (usually starting in years 2 or 3) are issued on a 4-year vesting schedule without the cliff and usually begin vesting immediately. In this case, the vesting schedules overlap.
• Performance grant: Grant high-performing employees an additional grant (usually any time after the cliff). Vesting schedules can vary, but typically they start vesting immediately. 
• Promotion-commensurate grant: Just as salary changes with a promotion, so the equity grant value should also be commensurate.
• Annual grants: A one-year vesting model granted annually.

How Much Should an Equity Refresh Grant Be, and When?

Carta's data offers a useful starting benchmark:

• Refresh grants typically run about 30% of a new-hire grant for the same role or level.
• About 20% of employees receive a refresh by year one, climbing to nearly 50% by year two.
• Pre-seed to Series A companies allocate roughly 35-37% of their equity pool to refreshes; Series B-E companies allocate 40-50%.

Timing usually follows company maturity, not a fixed calendar: promotion-based refreshes first (once a leveling framework exists), performance-based refreshes next (once reviews are calibrated), and tenure-based refreshes last (once end-of-vesting attrition becomes a recurring pattern).

Pave's own real-time dataset could go further here, showing live equity-pool allocation by stage instead of a periodic survey. If Pave's data team can pull that cut, it would give this section a genuine proprietary-data edge over competitors relying only on third-party benchmarks.

How to Model Equity Refresh Dilution

Modeling dilution from a refresh program comes down to one formula:

New refresh shares ÷ new fully-diluted share count = dilution %

Here's a simple example. 

Say your company has 10,000,000 fully-diluted shares outstanding today. You roll out a refresh program that grants 200,000 new options across eligible employees this cycle. 

Your new fully-diluted share count becomes 10,200,000 (10,000,000 + 200,000). Dividing the new refresh shares by that new total: 200,000 ÷ 10,200,000 ≈ 1.96%, so this refresh cycle dilutes existing shareholders by roughly 2%.

Run this calculation every cycle, not just once, since refresh grants compound over time as multiple overlapping grants accumulate. Modeling dilution across several years, not just the current cycle, is what actually tells you whether your option pool can sustain the refresh strategy you're planning without an unplanned pool increase.

Considerations Before Rolling Out an Equity Refresh Program

There is no perfect approach, only considerations to make: 

• Annualized total comp: Consider the annualized value of an employee’s salary + stock option value. A decrease in total compensation in coming years does not optimize for retention. 
• Compensation philosophy: Do you have a pay-for-performance model? Do you only adjust compensation for role/level changes? Be thoughtful. More importantly - be consistent.
• Company stage & employee tenure: Equity refresh grants are fairly uncommon when a majority of employees haven’t even hit their cliff yet, but if you’re waiting until you’ve had employees for 3-5 years before rolling out an equity refresh program, you’ll be behind the curve.
• Valuation: Is your valuation increasing rapidly? Remember, 409a valuations are refreshed once a year at a minimum (this means the strike price employees will pay increases each year that you wait to grant them more equity).
• Total rewards: Clearly, there is more to the equation than just salary and equity alone. Consider the weight of other forms of compensation and how you want to reward employees (e.g. cash incentives like bonus and commissions).
  

Retention pressure hasn't disappeared just because the market has cooled since 2021's hiring frenzy. Savvy teams still give retention strategies a fresh look on a regular basis, and equity refreshes are very often part of that equation, even in a more measured hiring environment.

But the impact of equity refresh grants doesn’t stop there. 

Candidates are starting to ask about equity refreshes. They’re seen as an additional benefit and a longer term incentive. So they can also serve as a helpful recruiting tool.

Again, be thoughtful. And be consistent. Don’t wait to establish a strategy until you’ve felt the effects of not having one. 

Oh, and if you’re struggling to figure out how to roll this sort of thing out in spreadsheets, you may want to check out Pave's platform