Evergreen refresh is the standing mechanism that restores an equity reserve—most often an employee option pool—to its target size whenever shares leave the pool through exercise, cancellation, or expiration.

How it works

A company’s equity incentive plan may state that the available pool shall equal a set percentage of fully diluted capitalization. Each quarter, forfeited unvested options return to the pool. When new hires receive grants, outstanding options rise. If exercised options convert to common stock, the plan authorizes new reserved shares so the unallocated bucket stays near the target— that replenishment is the refresh.

Refresh differs from a one-time pool increase at a financing round. Investors sometimes accept evergreen language in early plans; later rounds may require explicit caps or shareholder approval for any refresh above an agreed percentage. Legal and cap-table software tracks reserved versus issued shares so finance teams know remaining grant capacity.

Why it matters

• Founders: Refresh avoids emergency board meetings before critical hires, but cumulative dilution can exceed what you assumed at the last priced round.
• Investors: Review refresh triggers, maximum pool size, and whether refresh shares come from authorized but unissued stock or require charter amendments that dilute everyone pro rata.

Common mistake

Equating refresh with “free” shares. Every grant still dilutes existing holders; refresh only automates the paperwork, not the economic cost.

Related ideas

See evergreen option pool, equity incentive plan, option pool, and fully diluted shares.