Hello, and welcome back to Inc.'s 1 Smart Business Story.Tech startups are slashing the equity grants that once kept employees loyal for years. "Refresh grants"—the renewal of stock compensation after four years—have dropped 42% since 2023 as venture capital tightens.

New hires still get equity to join, but existing workers are increasingly left empty-handed. AI companies, however, seem to be an exception and are refreshing 100% of their employees' equity grants, flush with investor billions while others scramble. Meanwhile, most tech firms are pivoting to tiny spot bonuses of $500-$1,000 instead. It's a seismic shift in how Silicon Valley pays its workers, as the divide between AI and everyone else keeps widening.

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BY KAYLA WEBSTER, STAFF EDITOR

The ownership perk that motivates many people to enter the tech field is getting less lucrative.

Working in tech used to mean employees could expect big bonus payments, usually every four years through granting shares to employees of their still-private companies. Those days are disappearing. Instead of renewing their equity grants to employees, many startups are prioritizing performance as they change their compensation strategies.

Equity compensation gives workers shares in their company every four years—which is a pretty good reason for workers to stick around. Companies and their boards decide how much to award employees and create a vesting schedule that determines when workers receive payouts, according to the investment firm Charles Schwab. That’s why four year payouts became an industry standard over the past decade, but the current economic climate is prompting companies to tighten pursestrings so much that offering equity to every employee isn’t sustainable.That’s especially true for private companies that rely on venture capital for funding because equity growth is limited—the ultimate goal is to become publicly traded, or sold, to drive up the value of the company. In a bad economy, companies have to worry about overextending themselves by promising employees payouts, and many are pulling back on equity offers.

“It’s the economy and the funding environment—compared to two or three years ago, funding was coming all the time, and there were these very high valuations,” Dylan Hughes, senior market insights program manager at Sequoia, a benefits brokerage serving the tech industry, says. “A lot of companies, even VC firms, are rethinking risk. ‘We don’t want to put all this money in there. We don’t have as much funds as we used to and now we’ve given all of these companies two years ago all this money, and then now our funds are a little lower, like we can’t just do the same thing.’”

Since venture capital firms are being more conservative with their investments, companies must do the same. Employee equity is one place to cut back.

Data from Sequoia’s nearly 800 clients—companies mainly based in California and New York—shows these companies are still using equity compensation to attract new talent, but they no longer renew the benefit for existing employees, at least not the full amount of shares they were given as a new employee. When equity compensation is renewed for an existing employee, it’s called a refresh grant. In 2025, large refresh grants dropped 42 percent from 2023. High level executives aren’t immune from these cuts—refresh grants for leadership dropped 43 percent.

AI companies are the only exception to this trend—100 percent of these companies serviced by Sequoia refresh their workers’ equity compensation grants after making the first cash payout, according to the findings. Hughes says that’s because AI companies aren’t having trouble attracting investments, and “are about the only group that is just getting that level of capital inflow on a regular basis.”

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