Startup Equity Negotiation

Understanding and Negotiating Startup Equity

Startup equity compensation can be confusing, and many candidates accept offers without fully understanding what they're getting. The most important metric is your percentage ownership of the company, not the number of shares. If you're offered 10,000 shares but the company has 100 million shares outstanding, you own 0.01% — a tiny fraction. Always ask: "What percentage of the company does this represent?" and "What's the current total number of outstanding shares?" This gives you a clear picture of your actual stake. Early-stage employees (first 10-20 hires) might get 0.5%-2% at a seed-stage startup; later hires might get 0.05%-0.2%. Knowing benchmarks for your role and join date helps you assess whether the offer is fair.

Understand the vesting schedule and cliff. Standard vesting is four years with a one-year cliff, meaning you don't earn any equity until you've been there a year, at which point 25% vests. The remaining 75% vests monthly over the next three years. If you leave before the one-year mark, you get nothing. Negotiate if this doesn't work for you: "Is there flexibility on the vesting schedule? I'd prefer a shorter cliff or monthly vesting from the start." Some startups are willing to adjust, especially for senior hires. Also ask about acceleration clauses: what happens to your unvested equity if the company is acquired? Single-trigger acceleration means it all vests immediately upon acquisition; double-trigger requires both acquisition and termination. Double-trigger is more common but less favorable to you.

Ask about dilution and future funding rounds. Every time a startup raises money, they issue new shares, which dilutes your percentage ownership. If you own 1% today and the company raises a Series A that dilutes everyone by 20%, you now own 0.8%. Ask: "What's your fundraising roadmap?" and "How much dilution should I expect over the next few years?" This helps you understand whether your equity stake will grow or shrink in value over time. Also request cap table transparency: who are the other shareholders, and what percentages do they hold? Some startups are open about this; others are secretive. Transparency is a green flag.

Balance equity with cash compensation based on your risk tolerance and financial needs. Equity is a lottery ticket — it could be worth millions or nothing. If you have student loans, a mortgage, or dependents, taking a massive pay cut for equity is risky. A common model: expect to earn 10-20% less in base salary at a startup compared to a large company, with equity making up the difference IF the company succeeds. If they're offering you $80K and equity when the market rate is $100K, that equity better represent meaningful upside. Use tools like the Holloway Guide to Equity Compensation to educate yourself, and don't be afraid to ask detailed questions. Startups respect candidates who understand the equity game — it shows you're sophisticated and serious about the opportunity.