How to Negotiate Equity at a Startup

Equity Is a Lottery Ticket — Treat It That Way

Startup equity can make you rich. It can also be worth zero. Most startup employees fall into the second category. That doesn't mean you shouldn't take equity — but you need to understand what you're getting before you accept.

Too many candidates hear "0.5% equity!" and imagine millions. In reality, equity value depends on dilution, valuation, vesting, exit outcomes, and dozens of other factors.

The Golden Rule

Never take a pay cut for equity unless you can afford to lose it. Equity is speculative. Cash pays your rent. Negotiate for both.

Questions to Ask Before You Accept

Don't just accept "You'll get stock options!" Ask these questions to understand what you're actually getting:

1. What percentage of the company do I own?

Why it matters: "10,000 shares" means nothing without knowing total shares outstanding.

"What percentage of the company does this equity grant represent, on a fully diluted basis?"

Example: 10,000 shares out of 10 million total = 0.1%. Out of 1 million total = 1%. Big difference.

2. What's the current valuation?

If the company is valued at $50M and you own 0.5%, your equity is theoretically worth $250K. But that's on paper — actual value depends on exit price and dilution.

"What was the company's valuation at the last funding round?"

3. What's the vesting schedule?

Standard: 4-year vest with a 1-year cliff. That means:

You get nothing if you leave before 1 year
After 1 year, you get 25% of your shares
The remaining 75% vests monthly over the next 3 years

Some startups offer longer cliffs (18 months) or faster vesting (3 years). Know what you're signing up for.

4. What's the strike price (exercise price)?

You don't get shares for free. You have to buy them at the strike price when you exercise your options.

Example: You have 10,000 options at a $1 strike price. To own those shares, you pay $10,000. If the company exits at $10/share, you make $90,000 profit ($100K value - $10K cost).

"What is the current strike price (409A valuation) for these options?"

5. What happens if I leave?

Most startups give you 90 days to exercise vested options after leaving. If you don't, you forfeit them.

That means you might have to pay thousands of dollars to buy shares in a company that hasn't exited yet (and might never).

"How long do I have to exercise my options if I leave the company?"

6. Is this an ISO or NSO?

ISO (Incentive Stock Option): Tax-advantaged if you hold shares long enough. Preferred.

NSO (Non-Qualified Stock Option): Taxed as income when exercised. Less favorable.

ISOs have limits ($100K/year), so senior hires often get a mix of both.

7. What's the preferred stock liquidation preference?

Investors often have liquidation preferences, meaning they get paid first in an exit. If the company sells for less than what investors put in, common shareholders (that's you) might get $0.

"What are the liquidation preferences for preferred shareholders?"

Red flag: If investors have a 2x or 3x liquidation preference, they could take most of the exit value even if the company "succeeds."

Typical Equity Ranges by Role and Stage

These are rough benchmarks. Actual offers vary based on funding, role, and negotiation.

Seed Stage (Pre-Product/Market Fit)

First 5 employees: 1-2%
Engineer / Designer: 0.5-1%
Mid-level hire: 0.1-0.5%

Series A (Early Growth)

Director/VP: 0.5-1.5%
Senior IC: 0.1-0.5%
Mid-level IC: 0.05-0.2%

Series B+ (Scaling)

C-Suite: 1-5%
VP: 0.3-1%
Individual Contributor: 0.01-0.1%

Later-stage startups offer less equity but more cash and less risk.

How to Negotiate Equity

1. Understand the Trade-Off

Startups often offer below-market salary + equity. Know what you're giving up.

"I see the salary is $20K below market. Can we increase the equity grant to 0.75% to offset that?"

2. Ask for More Equity (Not Just Salary)

Equity is easier to negotiate than cash at early-stage startups. They want to preserve runway.

"I'm excited about the mission. Would it be possible to increase the equity from 0.3% to 0.5%?"

3. Negotiate for an Early Exercise Option

This lets you buy shares before they vest, potentially saving on taxes. Not all companies offer it, but it's worth asking.

4. Request a Refresh Grant

After your initial grant vests, ask for more equity in future performance reviews. Top performers often get annual refresh grants.

Negotiation Script

"I'm really excited about this opportunity. Given the below-market salary and the risk of joining an early-stage company, would it be possible to increase the equity grant from [X]% to [Y]%? I'm confident I can help drive [specific outcome], and I want to feel like I'm invested in the company's success."

Red Flags to Watch For

🚩 Refusing to disclose equity percentage: If they won't tell you what % you own, walk away.
🚩 Aggressive liquidation preferences: 2x+ preferences mean investors take most of the exit.
🚩 Short exercise window (30 days): Standard is 90 days. Shorter is employee-hostile.
🚩 Vague answers about funding or runway: If they can't tell you how much cash they have, that's a problem.
🚩 No employee stock option pool: If there's no reserved pool for employees, future hires will dilute you heavily.

Final Reality Check

90% of startups fail. Even "successful" ones often exit at valuations that leave common shareholders with little. Go in eyes-wide-open: equity is a bonus, not a guarantee. Negotiate for cash first, equity second.