Stock Options · Compensation

How often to grant incentive stock options to employees?

Justin Reed President and CEO of C-Motive Technologies

October 10th, 2016

Has anyone here granted ISOs to employees on a regular basis (e.g. annually) to keep them motivated and incentivized to stick around? To be clear - this is in addition to having multi-year vesting on each ISO award. This idea was recently recommended to me from someone's prior experience.

I'd like to hear if others have done the same, and if so, how it worked out.

We are a seed stage company with less than 10 employees and I want to ensure our team is properly incentivized. Most people I've talked to only grant ISOs once, when an employee is hired, and the grants have multi-year vesting with a cliff to encourage the employees to stick around for a while. Sometimes additional ISO grants are awarded for really key contributions, but these are not typical.

What has your experience been?

Peter Stone Attorney at Hopkins & Carley

October 10th, 2016

Annual grants could deplete your option pool too quickly. The time to consider green-up grants is when key contributors are getting close to the end of their four-year vesting schedules. You don't need to give follow-on grants to everyone. Concentrate them on the people you can't afford to lose.

Jennifer Ernst

October 10th, 2016

At my last company (out of Norway), the management team received annual grants and ISOs were used to reward key employees that had made strong contributions. 

Here in the Valley, more common is to re-up the management team at a financing round to keep them whole.  This rarely trickles down, though I would argue there should be some refresh schedule for key hires.  Otherwise, when that last 1/4 vests, it's just an automatic trigger to make someone reassess their commitment.