What Is a Double-Trigger RSU?

RSUs are one of the most common forms of startup equity today. If you’ve been granted double-trigger RSUs, it’s worth understanding what they mean for taxes, liquidity, and your ability to access any of that equity value.

Not all RSUs are created equal, and if you’re working at a private company, your RSUs might not fully “count” until two very specific events happen. Let’s break it down.

First, what is a double-trigger RSU?

A double-trigger RSU is a restricted stock unit that requires two separate events to happen before you get the shares, and before you owe any taxes:

1. Time-based vesting: You stay at the company long enough to hit your scheduled vesting milestones.
2. Liquidity event: The company goes public or gets acquired.

In other words, your RSUs might start vesting on paper after a year (typical 1-year cliff), but they won’t settle into actual shares (or trigger taxes) until the company has an exit.

This is different from single-trigger RSUs, where vesting alone triggers ownership and taxes, even if the company stays private.

Why companies use double-trigger RSUs

Most private companies issue double-trigger RSUs because they’re trying to protect you from a tax nightmare.

Here’s why: If your RSUs vested while the company was still private, they’d be taxable immediately. That’s fine at a public company; you can just sell some shares to cover the bill. But at a private company? You could be stuck owing thousands of dollars in taxes on shares you can’t even sell.

Double-trigger RSUs delay that problem by tying taxation to a liquidity event. You don’t owe anything until you can sell.

Smart in theory. But it’s not always great in practice.

The downside: you might never see those shares

Double-trigger RSUs only convert to stock if both triggers happen. And that second trigger (the liquidity event) is completely out of your control.

If the company never IPOs, never gets acquired, or delays an exit event year after year, your equity stays in limbo. You might work four years, fully vest your RSUs, and still hold nothing if the company hasn’t hit the second trigger.

And if you leave before the exit? Some double-trigger RSUs include “must be present to win” clauses. That means even fully vested RSUs expire if you’re not an active employee at the time of IPO or acquisition.

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Real-world examples

Stripe. Figma. Databricks. All different companies, same story: after years of waiting, double-trigger RSUs are finally converting into actual shares.

The moment those RSUs release, you’ve hit the second trigger and triggered a tax bill, too. Your equity is now taxable as ordinary income, whether you sell or not.

Take Stripe. They said they would raise about $2.3 B to cover employee-withholding taxes tied to its RSU release—a liquidity trigger that turns previously “paper” RSUs into real, taxable shares. Databricks? Same idea: tender offers and acquisitions are pushing those long-frozen RSUs into your brokerage account.

So, what now?

• Model the tax impact. RSUs aren’t taxed twice, but it can feel close. You’re taxed once when shares settle; later any gains are counted as capital gains when you sell.
• Decide whether to sell. Diversify or double down? Your call.
• Don’t assume withholding covers it. Most companies default to 22%. You might owe more come April.

If your second trigger just hit, the best move isn’t to celebrate—it’s to plan.

What happens when the second trigger hits

When your company IPOs (or gets acquired), and your time-vested RSUs finally meet both triggers, here’s what happens:

• Depending on the company, the actual delivery of shares might take some time after the liquidity event. That lag can affect your ability to sell quickly or plan for taxes, especially in volatile markets. Typically, there is a 180-day lock-up after a company IPOs.
• The fair market value of those shares is treated as ordinary income and reported on your W-2. Your company will typically withhold taxes, usually at a flat 22% rate if your total income is under $1 million for the year, or 37% if your total income exceeds $1 million for the year. 

Let’s say you’ve vested 10,000 RSUs over 4 years, and the IPO happens when shares are worth $50.

Your taxable income:
10,000 × $50 = $500,000

Taxes withheld (22%):
$110,000

Shares withheld for taxes:
2,200 shares

Net shares you receive:
7,800 shares

If your marginal tax bracket is above 22%, you’ll owe more at tax time.

Curious what those “paper” RSUs might actually net you? Run a quick scenario in Prospect’s free Equity Calculator. See taxes, share-withholding, and cash-in-hand before the second trigger ever hits.

Here’s the kicker: you’ll get taxed all at once

With traditional single-trigger RSUs, your tax burden is spread over multiple years as you vest. But with double-trigger RSUs, you might get hit with all the taxes in a single year, when the second trigger is satisfied.

This can push you into a much higher bracket, especially if you’ve got other income from bonuses or a tender offer. You could owe hundreds of thousands in taxes all in one shot, even though you’ve been earning those RSUs slowly over several years.

One upside? If you also have ISOs, this high-income year could be the perfect time to exercise and hold them, since the spread between your regular tax and the alternative minimum tax might be narrower. Strategic stacking can help reduce total tax across your portfolio.

See how Prospect’s Tax Solver could shave five figures off that bill.

What if your company waives the second trigger?

In some cases, companies offer tender events or secondary sales before an IPO. If they want to let RSU holders participate, they’ll need to waive the liquidity-based second trigger.

This is called a partial waiver, and it allows RSUs that have already vested to settle and be sold.

A few things to keep in mind:

• Only the company can waive the trigger; you can’t do it yourself.
• The waiver typically applies to a specific pool of RSUs and may be one-time only.
• Frequent waivers risk destroying the substantial-risk-of-forfeiture test, which could make all vested RSUs immediately taxable; companies therefore limit waivers—often to a single event. 

If your company is offering a partial waiver, ask questions. Who’s eligible? Are you still required to be an employee? What are the tax terms? And will it affect your other equity?

Final thoughts

Double-trigger RSUs aren’t bad; they exist to protect employees from tax burdens on illiquid equity. But they can also delay or deny access to the value you’ve earned.

If you’ve been granted RSUs at a private company, check your grant docs. Confirm if they’re double-triggered, ask about the second trigger policy, and start building a plan around tax timing, sale strategy, and long-term value.

And remember: Not all equity is created equal. Knowing when and if your RSUs will ever become real is a critical part of understanding your total compensation.

If you’re sitting on double-trigger RSUs,  it’s worth doing the math.

• What are your RSUs worth today?
• How much tax will you owe when they settle?
• Should you sell some to cover taxes, or hold for long-term gains?

At Prospect, we help startup employees forecast their equity outcomes, model tax scenarios, and make smarter decisions when liquidity events finally happen. 

Whether you’re waiting on your second trigger, planning to leave, or just trying to avoid a tax surprise, we can help you earn more from your equity.

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