47 Percent of Startup Employees Receive Refresh Equity Grants

Founders - here's new data and best practices on issuing refresh equity to your startup employees.

First big question: is this common?

Turns out, yes! I was pleasantly surprised by this data.

About 47% of employees at Carta startups receive some sort of refresh equity grant as they hit year 2 of their tenure. Nearly 70% of employees who make it to the end of their initial equity grant (typically 4 years) will receive a refresh grant.

Let's do some quick breakdowns on common refresh grant types.

𝗧𝗶𝗺𝗲-𝗕𝗮𝘀𝗲𝗱 𝗥𝗲𝗳𝗿𝗲𝘀𝗵 𝗚𝗿𝗮𝗻𝘁𝘀

• Issued as an employee hits a set length of time at a company, generally to help ensure retention beyond the period of the initial grant.

• Typically after 2-3 years have elapsed from the initial grant date

Traditionally, this tenure-based refresh is simply another 4-year grant without a cliff. So the employee sees an immediate reward. However, this does mean that that the total equity issued to that employee actually peaks at the very end of the initial grant (when both equity grants are being vested simultaneously).

Some companies, like Carta, employ the "boxcar" grant approach to solve the 4-year drop issue. The employee is still issued the refresh grant 2 or 3 years into the initial one, but the vesting is held until 12 months following the end of the initial grant period.

Same equity, different vesting.

𝗣𝗿𝗼𝗺𝗼𝘁𝗶𝗼𝗻 𝗚𝗿𝗮𝗻𝘁𝘀

• Granted during a promotion (obviously) and generally try to match the midpoint from the new level to ensure the employee gets an equity bump up.

𝗣𝗲𝗿𝗳𝗼𝗿𝗺𝗮𝗻𝗰𝗲 𝗚𝗿𝗮𝗻𝘁𝘀

• Granted to top performers when they hit major milestones.

• Typically 20-30% of the initial grant size

Obviously this can all be a major hassle and headache to track for your employee option pool - unless you happen to be on Carta Total Compensation where we help streamline the whole process for you 🙏

Give me a shout in the comments with specific refresh questions!

#cartadata #equityrefresh #startups #founders #compensation