What Is an Equity Refresh Grant?
A refresh grant is a new option or RSU grant issued to an employee who has fully or substantially vested their initial grant. The purpose is to restore a forward-looking equity incentive so the employee remains motivated to stay with the company and contribute to long-term value creation.
The refresh grant operates exactly like the initial grant: it has its own strike price (current FMV), its own vesting schedule (typically 4 years with 1-year cliff), and its own expiration date. Unlike the initial grant, the refresh is typically sized smaller — often 25–50% of the original grant — because the employee already has substantial vested equity from the initial grant.
Refresh grants stack with the original grant. An employee who joined three years ago with a 10,000-share grant (4-year vest) and receives a 4,000-share refresh in year 3 has overlapping vesting schedules: the original continues vesting through year 4, the refresh begins vesting in year 4 and continues through year 7.
Why Refresh Grants Matter
The structural problem: a four-year vest with a one-year cliff means employees become fully vested after 48 months. From that point forward, the equity incentive to stay is zero — they own everything they were promised, and walking away does not cost them anything more than they would lose by leaving any other employer.
This creates a retention cliff at the 4-year mark. Companies that do not have a refresh program in place see significantly higher attrition among 4+ year tenured employees, particularly senior engineers, product leaders, and go-to-market team members whose accumulated context is most valuable to the company.
The cost of losing a 4-year tenured senior engineer typically exceeds €100K in recruiting and ramp time for the replacement. A €20K refresh grant (in modelled equity value) avoids that cost in expectation. The math is overwhelming once a company has more than 30 employees on the original grant cohort.
Timing Strategies
Two common refresh strategies. The annual performance refresh: every employee receives a small refresh grant each year (typically 0.5–2% of role-level annual grant), sized by performance rating. This smooths the vesting cliff over time and ties refreshes to ongoing performance management.
The cliff-triggered refresh: employees receive a larger refresh at the 3-year mark (sometimes the 2.5-year mark) sized to restore approximately the same level of unvested equity they had at the 1-year cliff. This avoids the cliff entirely and creates a continuous forward-looking incentive.
Companies often combine the two: annual small refreshes for everyone with cliff-triggered larger refreshes for key roles. The combination is operationally heavier but creates the most defensible retention profile across the full employee population.
Sizing and Investor Expectations
Refresh grant sizing should be tied to the employee's role level and current performance, not to their tenure. A standard framework: define role-level annual equity grant targets (e.g. senior engineer 0.10% annually, principal engineer 0.20% annually, director 0.30% annually). Use these as the refresh denomination.
Investor expectations vary. Top-quartile investors expect a documented refresh program by Series B and consider its absence a flag of weak people operations. Earlier-stage investors generally do not push on refresh until the company has 25+ employees on the initial grant cohort.
The refresh program should be documented in a written equity policy, approved by the board's compensation committee, and consistently applied. Ad-hoc refreshes granted by the CEO outside a structured framework create resentment among employees who were not considered and legal exposure if the pattern looks discriminatory. See the [ESOP guide](/captable/esop) for the broader equity programme framework.
Impact on Option Pool
Refresh grants accelerate the depletion of the option pool. A company with 100 employees and an annual refresh program at 0.05% average per employee consumes 5% of the cap table per year just on refreshes — before any new-hire grants. Most option pools created at Series A (typically 10–15%) do not last more than 2–3 years under that consumption rate.
This means the option pool top-up conversation arrives sooner than founders expect. Top-ups are typically done at the next priced round (where the new investor takes the dilution) but can also happen between rounds via a board-approved increase to the pool, which dilutes existing shareholders pro-rata.
CAPLINK's option pool forecasting projects forward consumption based on headcount growth and refresh program rules, surfacing the point at which the current pool will be exhausted. Founders use this to time the next top-up and to negotiate pool top-ups proactively at the next round rather than reactively when grants need to be issued. See [option pool shuffle](/captable/option-pool-shuffle) for how the pre-money option pool top-up affects new-round dilution and [vesting schedules](/captable/vesting-schedules) for the underlying vesting mechanics that refresh grants stack on top of.