Guide

Interviewing

Evaluating startup equity

Translate percentages into scenarios. Price startup equity as a risk asset, not a promised TC line on levels.fyi.

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Startup offers seduce with percentages. Translate to scenarios. Do not assume "0.5% of a unicorn."

For the mechanics, pair this with employee equity, equity taxes and liquidation preferences.

Concept

Options are not RSUs. You may need to pay a strike price to exercise, handle tax events, and live with a post-termination exercise window. A 4-year vest with a 1-year cliff is common.

Walking through the questions

  1. Percent ownership after option pool and dilution — ask for fully diluted % and recent 409A / preferred price if available.
  2. Strike price and vest — cost to exercise; cliff; what happens if you leave.
  3. Fundraising reality — how much capital needed, runway, whether a down round is plausible.
  4. Exit math — at a $100M acquisition after dilution, what might your slice be worth after preferences? Preferred shareholders get paid first; common/options can get little in mediocre exits.
  5. Cash runway for you — can you afford the base if equity is a lottery ticket?

Trade-off

Cash-heavy big tech vs equity-heavy startup. If you need predictable savings, rent, or visa stability, weight cash and RSUs at durable companies higher. If you have runway, believe in the team and understand the cap table, a lower base with meaningful equity can be rational — but price it as a risk asset, not a promised TC line on levels.fyi.

A practical approach: assign startup equity a discounted expected value (often much less than the pitch-deck fantasy) and decide whether the learning, scope and people justify the cash haircut.

At startups, title inflation is real — negotiate the scope of the role and the equity, not just the word "senior." See mapping titles.

Common mistakes

  • Treating a percentage as TC on levels.fyi.
  • Ignoring liquidation preferences. Common can get little in a mediocre exit.
  • Skipping strike, 409A, and post-termination exercise windows.
  • Assuming you will stay four years and refreshers will appear.

Check yourself

The pitch is "0.5% of a unicorn." What five questions do you run?

Fully diluted %, strike and vest, fundraising reality, exit math after preferences, and whether you can live on the cash.

You need visa stability and rent. How do you weight a low-base / high-option package?

Weight cash and durable RSUs higher. Price the options as a risk asset, not promised TC.

Key takeaways

  • Model startup equity as a risky asset; learn dilution, preferences and taxes.
  • Options ≠ RSUs. Strike, cliffs, exercise windows and 409A matter.
  • Preferred gets paid first. Mediocre exits can leave common with little.
  • Decide whether learning, scope and people justify the cash haircut.

Further learning

Next, when two written offers land: juggling multiple offers.

Employee equity

Offers and negotiation

Comp components, why level beats base, market data, negotiation scripts and evaluating startup equity without wishful math.

Employee equity

Options vs RSUs, strike prices and 409A, vesting and exercise windows, and how to evaluate a startup offer with ownership math.

Equity taxes: ISOs, NSOs, 83(b), AMT and QSBS

How US tax rules hit option exercise and share sales — NSO ordinary income, ISO AMT, 83(b), QSBS after the 2025 changes.