Performance Stock Units (PSUs)
Equity that vests only if specific performance goals are met, in addition to time-based vesting.
Definition
PSUs are stock units that vest based on achieving specific performance milestones (revenue targets, stock price thresholds, etc.) in addition to or instead of time-based vesting. They are more common at later-stage companies and public companies. PSUs can be worth more or less than the target amount depending on performance; they might pay out at 0% if targets are missed or 200% if exceeded.
Why it matters
PSUs tie your equity compensation directly to company performance. Unlike time-vested RSUs, you could receive fewer (or zero) shares if the company misses its targets. Understand the performance metrics and assess how achievable they are.
Example
You receive 5,000 PSUs that vest in 3 years if the company hits $100M ARR. If ARR reaches $80M, you get 80% (4,000 shares). If ARR hits $120M, you get 120% (6,000 shares). If ARR is below $50M, you get nothing.