How to Negotiate Equity in a Startup: 5 Things Every Candidate Should Know

Negotiating startup equity can be one of the most impactful parts of your compensation package.

Why Equity Matters in Startups

When you’re joining a startup, your compensation package often includes more than salary - equity can, and hopefully will, be the most significant part of your compensation.

Despite its prevalence, many candidates are unsure how startup equity for employees really works and place less focus and effort around negotiating equity in startups. Understanding equity grants in private, venture-backed companies is a very different beast to equity granted in public companies.

Successful equity negotiation at a startup means looking beyond the headline number of shares, the percentage, or current value. It pays to understand vesting schedules, secondary opportunities, additional grants, strike prices, and much more.

5 Key Things to Know When Negotiating Equity In Startups

1. Prepare a Plan and Prioritize Your Requests

Go into the conversation with a clear sense of your must-haves versus nice-to-haves. If equity is your priority, decide upfront how much you’re willing to trade off on salary, signing bonus, or title to get a stronger equity position.

It’s important to gather a few data points before negotiating equity in startups - talk to friends in the industry, peers, or a recruiter to understand what’s typical for your role, company stage, and valuation.

Early-stage companies often use a sliding scale for equity grants and base salaries - the higher the salary, the lower the equity grant, and vice versa. It’s a risk/reward tradeoff that’s different for everyone.

2. Understand Vesting Schedules

Most startups have a 4-year vesting period with a 1-year cliff. That means nothing vests until you’ve been with the company for 12 months, after which 25% vests at once, and the rest typically vests monthly or quarterly over the following three years.

It’s important to ask if there’s any accelerated vesting in the event of a change of control - this is often level-dependent, but always worth clarifying.

3. Consider Alternative Levers

If the startup you're interviewing with can’t move much on equity, ask about other levers such as:

• Milestone-based bonuses tied to revenue or product goals

• Signing bonuses to offset a lower equity grant

• Equity top-ups at future funding milestones

These can meaningfully improve your total package while still participating in startup equity for employees.

4. Remember That Equity Is Negotiable Beyond Day One

Many candidates assume equity is fixed once they join. In reality, negotiating equity in startups can happen again later - during promotions, pay raises, or funding rounds.

Make sure to revisit the conversation as your role grows and the company scales. Every performance review should include a review of your current equity grant.

5. Get Clear on the Equity Type and Dilution

Are you being offered stock options, restricted stock units (RSUs), or common shares? Each has different tax and liquidity implications.

It’s also important to understand the timeframe around purchasing equity should you leave the company. Some startups are more generous than others with post-departure exercise windows.

Always talk to a tax expert to understand the implications and plan ahead - equity is a major asset class, and proper planning can make a big difference in long-term outcomes.

FAQ

How does equity compensation work in a startup?

Equity gives you ownership in the company, typically through stock options or RSUs. These shares vest over time, meaning you earn them gradually as you stay with the company - a cornerstone of startup equity for employees.

Can I negotiate both salary and equity at a startup?

Yes. You can often adjust the mix - for example, taking slightly less salary in exchange for more equity. Just make sure it aligns with your financial needs.

What happens to my equity if I leave before it fully vests?

You usually keep only the vested portion. Anything unvested goes back to the company’s option pool.

How much equity should I expect at an early-stage startup?

It varies by role, seniority, and stage. Early hires might see 0.1% -1% or more, while later-stage companies typically offer smaller percentages.

Is equity always worth something?

Not necessarily. Equity only pays off if the company grows and reaches an exit (IPO or acquisition). It’s high-risk but potentially high-reward - that’s the nature of negotiating equity in startups.

Conclusion

Equity can be one of the most powerful parts of your compensation package - but only if you know how to approach negotiating equity in startups effectively.

By understanding vesting, clarifying terms, and planning what to ask for, you’ll set yourself up to capture the true upside of joining a high-growth company. If you’re exploring startup opportunities and want help evaluating offers, get in touch with our team today.