VC & PE Glossary
What Is Promotion Grant?
Updated
Definition
A promotion grant is an equity award — usually stock options or RSUs — given when an employee is promoted to a higher role or level. It refreshes ownership so compensation stays aligned with expanded scope and market benchmarks.
Useful for: Founders, Investors
A promotion grant is new equity issued when an employee moves up a level — reflecting bigger scope, harder-to-replace skills, and updated market compensation for that title.
How it works
Companies maintain leveling guides: each band has a target equity range. When an engineer becomes a VP or a director becomes a senior director, HR compares current vested and unvested holdings to the new band midpoint. The gap is often filled with a promotion grant, vesting on the standard schedule (typically four years with a one-year cliff for options).
The grant requires board approval under the /glossary/equity-incentive-plan. Size depends on stage, dilution budget, and how underwater earlier grants are. Promotion grants differ from /glossary/refresh-grants, which reward tenure and performance without a title change — though startups sometimes blend the two informally.
Why it matters
- Founders: Promotion equity keeps leaders who survived chaos from leaving for a fresh grant elsewhere.
- Investors: Option pool size and grant discipline show up in diligence; sloppy ad-hoc grants dilute everyone.
- Operators: Document criteria so promotions feel fair across gender and tenure lines — ad hoc grants create pay equity risk.
Common mistake
Promoting in title only with a small cash bump and no equity refresh. The employee’s ownership percentage shrinks after each fundraise; promotion grants partially offset that dilution.
Related ideas
/glossary/refresh-grant, /glossary/equity-incentive-plan, leveling, and retention packages.
Related terms
- Equity Incentive Plan — An equity incentive plan is the board-approved program authorizing stock options, RSUs, and other equity awards to employees, directors, and advisors within a defined share reserve.
- Refresh Grant — A refresh grant is additional equity awarded to existing employees — usually options or RSUs — to maintain competitive ownership after dilution, strong performance, or tenure, without requiring a promotion.
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Common questions
Short answers for founders, LPs, and operators